Rupee may have a weak start; yields likely to fall

The contraction in the Index of Industrial Production (IIP) could dampen the sentiments in the foreign exchange market on Monday, with the rupee's weakness.

Dashing hopes of a recovery, the IIP contracted 2.1 per cent in November 2013, the lowest in six months. This was due to poor performance of the manufacturing sector and lower consumer goods output, particularly white goods.

The rupee had ended strong on Friday at 61.91 a dollar compared to the previous close of 62.08. The Indian currency had opened at 62.01 and touched an intra-day high of 61.83 a dollar.

"Now we are waiting for the inflation data, which will provide further direction to the rupee. The rupee may trade between 61.70 and 62.40 this week," said a currency dealer with a public sector bank.

December retail and wholesale inflation data would be released this week.

The Consumer Price Index-based inflation hit 11.24 per cent in November 2013 against 10.17 per cent in the previous month. The Wholesale Price Index-based inflation for November 2013 was 7.52 per cent against 7 per cent the previous month.

Government bond yields could fall this week as December inflation was expected to show an improvement. The yield on the 10-year benchmark government bond ended at 8.76 per cent on Friday against the previous close of 8.79 per cent.