Rupee may touch a new-low; yields expected to rise further

Bond yields are set the rise further and the rupee may touch a new all-time low this week. The month-end dollar demand from importers are expected to keep the rupee under pressure and  tracking the weakening rupee government bond yields will rise.

 

The yield on the 10-year government bond rose by 40 basis points on Friday compared with Wednesday's close of 8.50%. While the rupee touched an all-time low of Rs 62.00 per dollar and ended at an all-time closing low of 61.77 compared with previous close of Rs 61.44.

 

Banks are set to take a hit on their treasury portfolio in this quarter as the yield on the 10-year government bond rose by 146 basis points since the start of this quarter. The yield was at 7.44% on June 30. 'Banks are in a position where they can neither cut their losses not go for fresh purchases of government bonds,' said Anoop Verma, vice president (treasury), Development Credit Bank. According to Verma next week the yield on the 7.16% 2023 government bond may touch 9%.

 

Meanwhile, the rupee may touch a fresh new low this week amid heavy dollar demand and defense related payments, said currency dealers. The negative sentiments prevailing in the equity market is also affecting the rupee against the dollar. 

 

The street is also expecting further steps by the Reserve Bank of India (RBI) and the government to arrest the rupee depreciation, though the steps taken in the recent past has failed to help the rupee.