Rupee, bond yields might rise this week

Last Updated: Mon, Sep 30, 2013 04:06 hrs
An employee counts Indian currency notes at a cash counter inside a bank in Kolkata

The rupee is expected to strengthen this week. Month-end dollar demand comes to an end and the Reserve Bank of India's recent measures would help attract dollar flows.

On the other hand, government bond yields are expected to rise from the current levels, with less appetite due to RBI's recent repo rate increase in the mid-quarter monetary policy review.

On Friday, the rupee ended at 62.50 to the dollar, compared with Thursday's 62.08; it weakened despite RBI intervention.

However, the yield on the 10-year benchmark government bond 7.16 per cent 2023 ended stable at 8.71 per cent, compared with Thursday's 8.72 per cent.

"Friday's weakness was due to bids from oil marketing companies and month-end dollar demand by importers. This week, the latter comes to an end," said a government bond dealer with a public sector bank (PSB).

Yet, it could weaken before strengthening. On Monday, after market hours, the current account deficit (CAD) data for the first quarter of this financial year will be released; it is expected to be around five per cent of gross domestic product.

For the fourth quarter of the previous financial year, it was 3.6 per cent of GDP. On Tuesday, the rupee could touch 63 to a dollar, said currency dealers.

RBI will auction government bonds for a notified amount of Rs 15,000 crore this week, due to which the yields might rise. "The yield on the 10-year benchmark government bond might trade in the range of 8.6-8.8 per cent this week and the bias is more towards yields rising," said a government bond dealer with a PSB.

On Friday, there was devolvement on primary dealers in the new 17-year government bond auction, of Rs 291 crore.

The notified amount of auction was Rs 2,000 crore.

However, the auction of three other bonds sailed smoothly, for a notified amount of Rs 12,000 crore. Earlier this week, there was an auction (on Monday) for a notified Rs 15,000 crore, which had devolved on primary dealers to Rs 4,030 crore.

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