Rupee seen appreciating, yields may fall

The rupee is seen appreciating this week due to easing concerns of interest rate hike by the US. The Bharatiya Janata Party (BJP) election victories in Maharashtra and Haryana are also expected to give the domestic currency a boost.

The rupee recovered from an over seven-month low on Friday to close at 61.44 compared with the previous close of 61.85 a dollar.

St. Louis Federal Reserve Bank President James Bullard has said the US should consider delaying the end to its bond-buying programme amid concern that slowing growth in the rest of the world will weigh on the recovery in the US.

At its meeting to be held later this month, the Federal Open Market Committee is expected to wrap-up its asset-purchase programme. The programme which once stood at $ 85 billion is now at a mere $15 billion.

"The results of Maharashtra and Haryana elections will be out on Sunday. If Bharatiya Janata Party (BJP) wins then it will be very positive for the currency market," said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai. Gonsalves expects the rupee to trade in the range of 61-62 next week.

On Friday the rupee ended at an over seven-month low due to widening of trade deficit. Trade deficit widened to $14.25 billion in September following a jump in oil and gold imports.

Meanwhile, government bond yields are seen falling on optimism that falling oil prices will aid the Reserve Bank of India (RBI)'s efforts to curb inflation. The yield on the 10-year bond ended at 8.39 per cent on Friday compared with previous close of 8.37 per cent. The head of treasury of a state-run bank said, "This week, the yield may fall further and it will be near the 8.30 per cent level."

The currency market as well as the bond market is open only for three days this week - Monday, Tuesday and Wednesday.