Rupee may appreciate; yields expected to fall

The rupee is seen appreciating next week on the back of dollar flows in domestic markets. These flows picked up recently but they are seen as temporary by the market.

The rupee appreciated to its highest level in three weeks on Friday, tracking gains in the equities and following a sharper-than-expected fall in Wholesale Price Index-based inflation. The currency ended at 61.93 on Friday, compared with the previous close of 62.44. It had opened at 62.25 a dollar. "The rupee may strengthen to 61.50 a dollar this week. The bias is towards appreciation," said a currency dealer with a state-run bank.

The movement of government bond yields will depend upon the vote-on account to be announced on Monday. The yield on the 10-year benchmark bond 8.83 per cent 2023 ended at 8.81 per cent on Friday, compared with the previous close of 8.87 per cent.

"The government's borrowing for the next financial year may not throw any major surprises in the vote-on account due to which yields may fall further," said a government bond dealer with a state-run bank. In the Union Budget of last year, the government had announced a gross borrowing plan of Rs 6.3 lakh crore for 2013-14, Rs 30,000 crore higher than Street expectations with a net borrowing plan was Rs 4.8 lakh crore.