Rupee seen down on concerns of weak economic data

The data on India’s fiscal balances and gross domestic product (GDP), for the April-June 2012 quarter due to be released on Friday, will have a bearing on bond yields and rupee levels this week.

Market participants are expecting dismal data reflecting further slippage and growth slowdown. “This could strengthen the case for further rate cuts,” said a bond dealer with a large public sector bank. Last week, the yields on the ten-year benchmark government bond closed at 8.21 per cent.

The country’s economic growth rate had slipped to a nine-year low of 5.3 per cent in the fourth quarter of the last financial year due to poor performance of the manufacturing and agriculture sectors. Ratings agency ICRA expects GDP to be lower at 5.1 per cent in the first quarter of the current financial year. The rupee that shut shop at 55.50 against the dollar last week, is expected to fall if economic data fails to lift investment sentiments. Also, higher demand for dollars from domestic oil marketing companies may weigh on the currency. Volumes in the foreign currency market were affected on Wednesday and Thursday, as public-sector bank employees were on strike.

The bunched dollar demand post the strike is expected to drag rupee lower this week.