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Rupee off lows, ends steady at 46.49/$

The rupee ended Monday steady, off early lows hit on dollar buying demand sparked by last week's killer earthquake in the western Gujart state, while forward dollar premia rose, pricing in an anticipated rate cut in the United States, dealers said.

Dealers said the dollar was bought in early deals and rose to Rs 46.535 as banks built up speculative positions to cash in on sentiment affected by Friday's earthquake in Gujarat which killed an estimated 20,000 people and left thousands homeless.

The rupee later recovered to end at 46.485/495, as the long dollar positions were unwound in the afternoon when foreign funds also sold dollars through their custodial banks.

Foreign funds have bought a net $704.3 million in Indian shares and equities this month till January 24, although the pace has slackened in recent days.

Dealers said forward dollar premia moved up amid concerns over the quake's huge economic burden.

An influential business lobby, the Federation of Indian Chambers of Commerce and Industry (FICCI), put building and construction losses across Gujarat at about Rs 150 billion..

India has asked the World Bank for $1 billion and the Asian Development Bank for $500 million to help rebuilding in the state.

The market was also pricing in expectations of a 50-basis-point rate cut by the US Federal Reserve later this week and this led to the paying (sell-buy swaps) in the forward market, dealers said.

Intra-day report

Indian government bonds edged lower in mid-morning, with sentiment depressed after the rupee weakened on worries over the economic impact of Friday's devastating earthquake in the western Gujarat state, dealers said.

The rupee was quoted at 46.525/540 per dollar in mid-morning, off 46.535 hit in some early deals and compared to its last close of 46.48/49.

Currency traders said the rupee weakened on a combination of covering of short positions and nervous buying triggered by the earthquake.

Bond prices were down by around 0.05-0.15 rupees.

Some traders said the earthquake, the country's worst in 50 years, could improve money market liquidity through increased government spending on reconstruction work.

Trading sentiment would remain cautious until the rupee settled and there were clear indications that government spending on earthquake related activity would not be financed by additional bond issues, dealers said.

Bonds were also down on market perception that current prices already factored in rate cut expectations, dealers said.

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