Rupee might weaken; bond yields could dip

The rupee is seen as weakening this week, due to month-end dollar demand from importers.

According to currency dealers, though Indian markets might continue to attract foreign flows, the Reserve Bank of India could decide to mop those through state-run banks. Domestic markets have been attracting foreign flows because there is an expectation that the sovereign rating of India could be upgraded.

“There will be demand from importers for dollars and dollar buying due to the government’s debt payments. The broad range would be between 60.60 and 61.40 a dollar,” said a treasury head of a state-run bank. The rupee had ended at 60.83 on Friday.

In the bond market, there are expectations that the limit for foreign institutional investors to buy government securities might be raised, since this is nearly full. “If that happens, the yield on the 10-year bond can even fall to 8.40 per cent,” said a trader with a state-run bank.