Rupee expected to touch 55/$ this week

The rupee is set to touch the 55-mark against the dollar this week, with the current account deficit (CAD) rising to a record high of 6.7 per cent of gross domestic product (GDP) in the December quarter. However, the Street expects this impact to be temporary and hopes the rupee would stablise below Rs 55 a dollar.

The rupee had ended at Rs 54.28 on Thursday compared with the previous close of Rs 54.37. The market was closed due to Good Friday. Even on Monday it will be closed due to the annual closing of accounts.

"There may be a small knee jerk reaction on that on Tuesday. But in the fourth quarter the pressure on CAD should be lower. The rupee may move in the range of Rs 54-55 . Even if it breaches the Rs 55 mark, it will come down," said N S Venkatesh, chief general manager and head of treasury, IDBI Bank.

According to Venkatesh the growth story is intact. If fiscal deficit and inflation is brought under control, we will not see much pressure on the rupee going forward.

The Street expects the auction of a new 10-year benchmark government bond on Friday, which will replace the current 10-year benchmark 8.15 per cent 2022.

"The current 10-year benchmark bond will trade in the range of 7.96-7.98 per cent. When the new 10-year benchmark hits, initially a trading range of 7.85-7.90 per cent is expected," said S Srinivasaraghavan, executive vice president and head, treasury of Dhanlaxmi Bank.

The yield on the 8.15 per cent 2022 ended at 7.95 per cent on Thursday compared with previous close of 7.99 per cent.