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The rupee might weaken this week, as companies have increased their dollar purchases ahead of Union Budget 2015-16. Besides, month-end dollar demand from importers will also keep the rupee under pressure. Government bond yields are expected to rise, owing to lack of significant appetite ahead of the Budget.
The Reserve Bank of India also keeps buying dollar through public sector banks (PSBs) to boost foreign exchange reserves, currently at an all-time high of $333 billion.
“The rupee could trade with a weakening bias and might weaken to 62.50 to a dollar this week. However, we do not expect beyond that because the central bank would intervene,” said the head of treasury of a PSB.
On Friday, the rupee ended at 62.22, compared with the previous close of 62.34.
Government bond yields could inch up, as banks are not planning to take a position ahead of the Budget. There are also concerns that the gross market borrowings of the government might be on the higher side.
“The yield on the 10-year benchmark bond might trade in the range of 7.68 to 7.75 this week. The bias is towards yields inching up from current levels,” said a bond trader with a PSB.
The yield on the 10-year benchmark bond ended at 7.70 per cent on Friday, compared with the previous close of 7.71 per cent.
