Rupee might weaken; yields seen falling

The rupee ended at Rs 62.29 on Friday compared with previous close of Rs 62.39 a dollar

The rupee is seen to be weakening this week due to dollar demand from oil marketing companies and defence-related purchases. According to currency dealers, though dollar flows in domestic markets might continue to support the rupee, the demand for dollar might weaken the rupee.

The rupee ended at Rs 62.29 on Friday, compared with the previous close of Rs 62.39 a dollar. “The rupee might trade in the range of Rs 61.80 to Rs 62.90 a dollar. Dollar demand from oil marketing companies and defence-related dollar purchases will keep the rupee under pressure,” said a currency dealer with a public sector bank.

Government bond yields are seen falling this week. However, the crucial inflation data for January, both Consumer Price Index inflation as well as Wholesale Price Index inflation will be the triggers for bond yields movement. The yield on the 10-year benchmark government bond 8.83 per cent 2023 ended at 8.74 per cent on Friday, compared with the previous close of 8.72 per cent. The yield ended marginally higher as the cut-off yields for the auction on the same day was higher that the expectations of the street.

“Bond yields may trade in the range of 8.60 per cent to 8.70 per cent this week. Inflation for January may be softer due to which the yields may have a falling bias,” said a government bond dealer.