Rupee expected to trade in a range

The rupee is expected to trade range-bound this week, amid flows from foreign institutional investors (FIIs). Mohan Shenoi, president - group treasury and global markets, Kotak Mahindra Bank expects the rupee to trade in the range of Rs 51.50-52.25 against the dollar.

On Friday, the rupee fell from a nearly six-month high to close at 51.86 against the dollar. The fall was due to some capital outflows at later trading sessions. The rupee had opened at 51.36 against the dollar.

However, the market fears at some point of time the Reserve Bank of India (RBI) might step in, as it needs to accumulate dollars to boost its forex reserves.

Traders do not expect any significant movement, this week in the yield of the 10-year benchmark 8.15 per cent gilt due 2022. According to Shenoi, the yield will move in the range of 8.12-8.25 per cent this week.

According to dealers, banks are investing in long-term gilts, as the scope for significant movement in the yield of the 10-year benchmark is not expected. Banks are investing due to factors like comfortable liquidity and slow credit offtake.

In the next few months the yield on the 10-year mark gilt is expected to drop further. “Unless growth really slumps and we see a prolonged rate cutting cycle, which is not our base case now, I think the 10-year benchmark gilt yield will find it difficult to break 7.70-7.75 per cent on the downside,” said Brijen Puri, executive director & head of markets, JP Morgan.

RBI will review monetary policy later this month.

Though the street expect further cuts in the repo rate, they are uncertain about the timing.