Currency World 23-07-2014 …

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Indian rupee closed flat and continued to trade in tight ranges, with trading dominated by dollar sales from foreign banks but offset by solid greenback demand from oil companies and other importers. Firmness in equity markets also continued to underpin sentiment, with indexes gaining for the fifth consecutive session amid continued buying by foreign investors.

The partially convertible rupee closed at 60.30/31 per dollar compared with 60.28/29 on Friday. The unit moved in a tight range of 60.165 to 60.32 range during the session. In the offshore non-deliverable forwards, the one-month contract was at 60.6 while the three-month was at 61.13.

Most Asian currencies rose on Monday, with the Thai baht touching a 7-month high, as investor risk aversion showed signs of easing, although market players remained cautious about geopolitical risks. The benchmark 10-year bond yield closed down 7bps at 8.7%, on reports that the country could raise the amount FII can buy in government debt by tweaking some of the sub-categories, while keeping the overall limit intact.

The benchmark five-year swap rate closed 1bp lower at 7.88%, while the one-year rate closed steady at 8.4%. In call money market, cash rate closed higher at 9/9.05% compared with Friday’s 7/7.1%.

The U.S. dollar traded steady to higher against major currencies in a cautious tone on Monday, as investors remained on the sidelines in safe-haven greenback, monitoring events in Ukraine and Gaza. Meanwhile in the Middle East, Israel pressed on with its ground offensive in Gaza in a conflict that has killed hundreds.

The euro slipped lower against the dollar and the yen on Monday, nearing the previous session’s 5-month lows as concerns over tensions between Russia and the West bolstered investor demand for safe haven assets. The euro has remained under pressure, after recent comments by ECB President Mario Draghi were seen as the latest sign that the bank is open to further monetary easing measures to stave off the risk of deflation in the euro area.

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