Rupee ends higher, bonds lower

The rupee ended higher on last minute dollars sell by banks and as demand reduced.

The spot rupee ended higher at Rs 42.83 against its previous close of Rs 42.87.

The widely traded 8.07%, 2017 paper closed lower at Rs 99.99 against its previous close of Rs 100.10.

The bonds ended lower after RBI set higher than expected cut-off yields at the two auctions. Worries over liquidity tightening post-CRR hiked Saturday surface.

Q: How would you look at rupee at this juncture, we seem to be seeing some kind of RBI support at the Rs 42.80 levels, do you think the rupee is peaking off at this level or 

do you think this is just smoothening by the RBI and you are going to see stronger rupee in the days to come?

A: It is difficult to answer at this point in time because we have seen about 2.5-3% appreciation of the rupee in the last month and half. At the same time inflation is very much on the front of RBI's policy at the moment, so they have been not very keen to intervene in large amounts. I would think that one might see bit of move up by maybe  0.5% or so but I would not be looking for more than that in terms of rupee weakening and I think that if what we are seeing turns out to be a bit of a trend in terms dollar weakness against the majors like euro, sterling, except for the yen then if that becomes little bit of trend you may have a bit more to go as far as rupee appreciation is concerned.

Q: Would you give it Rs 42.50?

A: It definitely looks possibly, its not far from here and if the dollar starts wreaking a bit, which it looks like it might, it is poised at that juncture. Euro is less than 0.5%-off from what is a significant high, and if it goes through that then you might see another bout of dollar weakness and I think 0.5-1% can be seen very rapidly on the rupee.