Weekahead - Debt/FX to watch inflation for direction

Reuters Market Eye - The Indian debt and foreign exchange market will be keenly awaiting wholesale and consumer price-based inflation data due early next week for near-term direction.

The consumer price data is due on Monday, while the wholesale price data is due on Tuesday.

WPI is expected to have risen 5.5 percent on year in April, a Reuters poll shows, marking the slowest pace since November 2009. Core WPI is expected to have risen 3.5 percent.

Traders say the WPI data will be crucial in setting expectations about the future course of monetary policy action, although very aggressive rate cuts are not expected.

The 10-year bond yield is seen holding in a 7.50 to 7.65 percent range next week, after yields slumped as much as 18 bps so far this week, to a 34-month low.

Traders will also await to see if the government decides to sell a new 10-year bond next week, which could send yields on the current benchmark up by 5-10 bps next week, according to traders.

Traders also expect continued buying of Indian debt and stocks by foreigners which is expected to boost the rupee.

USD/INR is seen holding in a broad 54 to 55 range next week with the dollar's moves versus global currencies also key for direction.

KEY FACTORS/EVENTS TO WATCH

Mon: Consumer price inflation

Tues: Wholesale price inflation

Wed: Money supply data

Fri: Bank credit and forex exchange reserves data

(Reporting by Swati Bhat)