Rupee could breach 60/$ mark again this week

The rupee would weaken further this week and could breach the 60-a-dollar mark.

The currency fell to a one month low on Friday on concerns that the trade deficit would widen from a 10-month high after violence in Iraq fuelled a surge in global crude prices.

"On Friday, there was dollar demand from corporates as well as oil marketing companies due to which, the rupee weakened. This week the rupee may trade in the range of 59.50-60.25 a dollar," said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

Gonsalves said the bias is towards the weakening of the rupee. The rupee ended at 59.78 on Friday, compared with the previous close of 59.26. It had ended at 60.05 on May 12.

However, according to currency dealers, any sharp movement in the rupee might result in the Reserve Bank of India (RBI) intervening in the foreign exchange market. Latest RBI data shows that foreign exchange reserves rose by $203.2 million to $312.59 billion in the week ending June 9.

In the past,RBI had intervened in instances when the rupee either appreciated or depreciated too fast. Tracking the weakness in the rupee, even government bond yields rose.

On Friday, the yield on the 10-year benchmark government bond ended at 8.60 per cent compared with previous close of 8.55 per cent. The respite from softening in Consumer Prices Index-based inflation to a three-month low of 8.28 per cent in May proved to be short-lived.

"This week, the yield may rise further by another 5 basis points. There are concerns that inflation may inch up as global crude prices rise," said a bond trader with a state-run bank.

On Friday, Brent crude oil prices had hit a nine-month high near $ 115 a barrel as the United States threatened military action against Sunni Muslim militants who have taken towns and cities in Iraq, raising concerns over its oil exports.