Rupee likely to weaken

The rupee is expected to weaken more on the back of dollar demand from importers. Currency dealers say it might even touch a fresh low this week, while government bond yields are likely to rise.

On Friday, the rupee closed at a record low of 61.10 a dollar, against Thursday's close of 60.44.

Due to the falling rupee, the yield on the 10-year benchmark government bond 7.16 per cent 2023 ended at 8.28 per cent against the previous close of 8.07 per cent.

"Dollar demand from importers are expected to continue as there are concerns on the street. It is even possible that the rupee may hit a fresh all-time low this week. I see the trading range at Rs 60.50 to Rs 61.50 per dollar," said a currency dealer with a state-run bank. According to the dealer, the Reserve Bank of India (RBI) may have to intervene heavily to arrest the depreciation.

Meanwhile, RBI's foreign exchange reserves shot up by $960.2 million to $280.17 billion on the back of a healthy rise in currency assets in the week ended July 26.

Last month, RBI had taken a number of liquidity tightening steps to arrest the depreciating rupee. However, these steps have failed to help much. In fact, these steps resulted in yields shooting up.

"The yield on the 7.16 per cent 2023 bond is expected to trade in the range of 8.20-8.35 per cent this week. The bias is more towards yields rising," said a government bond dealer with a state-run bank.