Bond and currency markets differ on where interest rates are headed

There is a divergence between what the currency market thinks about interest rates and what the bond market perceives where rates are headed.
 
While the bond market is relatively conservative about their interest rate expectations, the currency market seems to be projecting that interest rates should be much sharper. However, this could be an anomaly caused by local factors, which should correct in the coming months, experts say.
 
The currency market gauge rates in the form of one-year forwards premium. The forward premium is the interest rate differential between India and the US, from where dollar flows in.