Rupee might fall further, yields could be range bound this week

The bias of rupee is towards weakening because of dollar demand by importers

The rupee is expected to weaken further this week due to dollar buying by importers. There are concerns on the Street the yuan devaluation would lead to India following a strategy of competitive devaluation.

Last week, the rupee weakened and fell near two-year low. The currency breached 65, owing to persistent dollar demand from importers.

"This week, the trading range for the rupee will be between 64.50 to 65.60 and the bias is more towards weakening because of dollar demand by importers," said the head of treasury of a public sector bank (PSB).

On Friday, the rupee ended at 65.01, compared with the previous close of 65.11 to a dollar. The rupee had opened at 65.18 and during intra-day trades, it touched a low of 65.31.

The government bond yields might trade range-bound this week. "The yield on the 10-year bond could trade in the range of 7.70-7.80%," said a bond trader.

Consumer Price Index-based inflation eased to 3.78% in July, compared with 5.40% a month ago. The yield on the 10-year bond had dropped sharply a day after the retail inflation data was released.

On Friday, the yield on the 10-year benchmark bond ended at 7.75%, compared with the previous close of 7.74%.