MUMBAI: The rupee continued to face the heat in afternoon trade on Monday. Heavy losses in the domestic share market and the dollar's strength
against other major currencies overseas pulled the rupee down. It was trading at 51.13 against the dollar at 3pm. Share benchmark BSE Sensex was down close to 5%.
Bonds also were trading weak on the first day after the government announced the borrowing programme for the new fiscal, with the yield on the bechmark 10-year paper rising 10 bps to trade at 7.05% at 3pm.
Traders say that RBI Deputy Governor Rakesh Mohan's statement that there will be no private placement of bonds has brought in further bearishness in the market. They add that bonds will remain under pressure in the coming days.
"Although the amount of buy backs announced by the RBI look sufficient, a lot will depend on the choice of bonds and the timing of operations," says Prasanna Patankar, senior vice president at STCI Primary Dealership. "The mood is not very good and yields could rise from here," he added.
After market hours last week, RBI said it would buy back Rs 80,000 crore of bonds between April and September and said MSS bonds of nearly Rs42,000 crore will mature in this period, buttressing the liquidity in the system.
The rupee weakened on Monday morning itself as the dollar strengthened against Asian currencies, with losses in the share market also affecting sentiment. The dollar and yen rallied on Monday as further trouble in the US auto sector affected investors' risk appetite towards emerging market assets.
