Re Weakens On Oil Concerns, Bonds Up.

The rupee weakened for a second day as overseas demand for Indian equities was offset by concern higher oil prices will undermine economic growth.

The rupee declined 0.1% to 45.09 on Tuesday's trade. The currency has declined 0.8% this year, the third-worst performance among the 10 most-traded Asian currencies excluding the yen.

Crude reached a 29-month high on Monday as government warplanes bombed rebel positions near the oil hub of Ras Lanuf in Libya, holder of Africa's largest oil reserves. India imports about 75% of the oil it uses and subsidises some fuel. Overseas investors bought $305 million more Indian shares than they sold in the first four days of this month, according to exchange data.

Offshore forwards indicate the rupee will trade at 45.87 to the dollar in three months, compared with expectations of 45.82 on Monday.

Eleven-year bonds rose for the first time in three days on speculation banks will add to their holdings of government debt to meet regulatory requirements before the financial year ends this month. RBI rules require banks to invest at least 24% of their deposits in government notes and other approved securities.

The yield on the 8.08% bond due August 2022, the government's most-traded debt, fell four basis points to 8.06% on Tuesday's trade. The price rose 0.29, or 29 paise per 100 face amount, to 100.15. The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, dropped three basis points to 7.37%.

Source : economictimes.indiatimes.com