Rupee seen appreciating further this week amid foreign flows

The rupee is seen appreciating further this week as it is expected that foreign flows will continue in domestic markets which will help. Government bond yields on the other hand is seen falling further.

The rupee had appreciated to 64.74 on Friday, a rise of 77 paise during the last week. "This week the rupee may trade in the range of 64.50 to 65.25 per dollar. The bias may be towards appreciation," said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

The appreciation in the rupee last week was due to easing concerns of a rate hike by the US Fed after data showed that the US non-farm payrolls rose by 142,000 in September, considerably lower than the 203,000 jobs the markets had expected. The Federal Open Market Committee (FOMC) will hold its next two-day meeting on October 27-28.

Meanwhile, government bond yields are seen falling further this week. In the recent past the rally in the bond market was triggered by RBI's 50 basis points rate cut last month in the monetary policy review.

"The yield on the 10-year benchmark bond may trade in the range of 7.48 to 7.56 per cent this week. The demand for the 10-year benchmark bond has come down slightly and traders are buying the 8.40 per cent bond maturing in 2024," said the head of treasury of a large state-run bank.

The yield on the 10-year benchmark bond ended at 7.55 per cent on Friday compared with previous close of 7.54 per cent.

RBI has decided to enhance the investment limit of Foreign Portfolio Investors (FPIs) due to which the enhancement will be by Rs 1,66,500 crore for government securities and Rs 3,500 crore for State Development Loans (SDL) from Monday. This would help to create some additional demand. Earlier it was Rs 1,53,500 crore for government securities and nil for SDL.