Rupee might fall, yields could rise

On Friday, the rupee ended at 62.32 to a dollar, compared with the previous close of 62.25

The rupee is expected to trade with a weakening bias this week, as experts believe the Reserve Bank of India (RBI) will continue to mop up dollar flows through public sector banks (PSBs). Government bond yields, on the other hand, might rise, as the retail inflation data for March is expected this week and the Street believes it will be on the higher side.

RBI has been mopping up dollar flows attracted by domestic markets and this has been getting reflected in their reserves position. RBI foreign exchange reserves had hit an all-time high of $343 billion for the week ended April 3, show data released on Friday.

"The rupee will trade in the range of 62 to 63 to a dollar and the bias is towards weakening," said a currency trader with a PSB. The rupee ended at 62.32 to a dollar on Friday, compared with the previous close of 62.25.

Consumer Price Index-based inflation rose to 5.37 per cent in February, from 5.19 per cent in January, mainly on account of high food prices.

"The yield on the 10-year benchmark bond might trade higher in the range of 7.80 to 7.85 per cent this week. But if the new 10-year bond is auctioned, yields will fall, as the coupon rate on that bond will be lower," said Debendra Kumar Dash, associate vice-president (treasury), Development Credit Bank. The 10-year bond yields ended at 7.80 per cent on Friday, against the previous close of 7.77 per cent.