Rupee down 30 paise on dollar demand; bonds advance

Mumbai, Feb 8: Extending losses for the second straight day, the rupee on Monday dropped 30 paise to close at 67.94 per dollar on persistent demand for the American currency from banks and importers on the back of higher greenback overseas.

A fresh fall in equity market also affected the market sentiment, a forex dealer said.

The domestic unit resumed lower at 67.85 per dollar as against the last weekend's level of 67.64 at the Interbank Foreign Exchange (Forex) market and dropped further to 67.96 before concluding at 67.94, disclosing a loss of 30 paise or 0.44%. The rupee dropped by 39 paise or 0.58% in two days.

The dollar index was up by 0.12% against a basket of six currencies in the late afternoon trade.

In the Asian market, the dollar gained against the yen during in late afternoon trade, lifted by dip buying and an improvement in risk sentiment on the recovery by Tokyo stocks.

In New York, the dollar strengthened against the yen and the euro on last Friday after the Labour Department's report on job gains in January bets the Federal Reserve will raise interest rates this year.

“The expectation of weaker growth is perhaps weighing on the rupee,” said Ankur Jhaveri, co-head of currencies and rates at Edelweiss Financial Services in Mumbai. “Also, Asian currencies in general have been pressured by the US dollar’s recent strength.”

Pramit Brahmbhatt of Veracity Financial Services said, “Despite positive cues from domestic equity market in the early trade, the rupee opened on a negative note near 67.8 levels and continued to trade with negative bias.”

In the forward market, premium for dollar inched up on mild buying pressure from banks and importers. The benchmark six-month premium payable in July closed steady at 202-204 paise while far forward January 2017 contract moved up to 412-414 paise from 411-413 paise on Friday.

In cross-currency trades, the rupee moved up against the pound sterling to end at 97.84 from 98.27 on Friday and recouped against the euro to 75.50 from 75.74. However, the domestic unit declined further against the yen to 58.22 from 57.91 per 100 yen.

Meanwhile, the yield on Indian sovereign bonds due May 2025 rose one basis point to 7.84%, prices from the central bank’s trading system showed. That on the new 10year note due 2026 climbed two basis points to 7.73%.

The Reserve Bank of India bought Rs 10,000 crore ($1.5 billion) of notes as planned on Monday, according to a statement. The RBI, which began open-market purchases of debt in December after a gap of almost two years, has now bought securities worth Rs 30,000 crore via three auctions as it addresses a cash shortage in the banking system. Agencies