Call money closes higher at 7.80/7.90 pc

Mumbai, Feb 2 (UNI) Call money surged 10 basis points higher to end at 7.80-7.90 per cent today, compared to Wednesday's closing after the Indian government announced on Friday a bond auction worth Rs 9,000 crore to be conducted by the central bank on February nine.

Aiding the sentiment is the suspected RBI intervention to rein in the surging Rupee.

Rupee surged to as much as 44.05, intra-day, after a number of developments this week boosted hopes for robust capital inflows.

Further, the Reserve Bank of India Governor Y V Reddy said on Wednesday the Central Bank's top priority is to bring inflation back into a 5.0-5.5 per cent range. He said the RBI would use multiple monetary instruments in the present situation. All these have added to the worries of an impending cash crunch.

Call money rates opened nearly 20 basis point higher at 7.80-8.00 per cent today, compared to Wednesday's closing. The intra-day, rates fluctuated between the low of 7.70 per cent and a high of 8.00 per cent.

The Reserve Bank of India raised its key short-term lending rate by 25 basis points to 7.50 per cent at its quarterly review today in an effort to tame inflation and curb credit growth. This would bring fresh foreign inflow in the country and thus increasing the money supply in the market. Thus, call money rates can be expected to cool down in the coming weeks.

However, Indian annual inflation stood at 6.11 per cent for the week ended January 20, up from the previous week's 5.95 per cent, data released on Friday showed. It hit a two-year high of 6.12 per cent at the start of January.

The yield on the benchmark 10-year bond ended at 7.70 per cent, down from the previous close of 7.72 per cent, but higher than the 7.67 per cent quoted before the government released inflation data.

India's Central bank raised its short-term lending rate by an expected 25 basis points to 7.50 per cent on Wednesday to rein in inflation. It left its borrowing rate unchanged at 6.0 per cent.

On Wednesday, the U S Federal Reserve left interest rates unchanged and said price pressures were likely to moderate. The Fed's decision helped yields to ease in early trade, dealers said.

UNI