Bond yields are set to rise further and the rupee could touch a new all-time low this week. The month-end dollar demand from importers is expected to keep the rupee under pressure and tracking of the weakening rupee, government bond yields will rise. The yield on the 10-year government bond rose by 40 basis points on Friday against Wednesday's closing figure of 8.50 per cent.
The rupee touched 62 against the dollar during intra-day trading and ended at an all-time closing low of 61.71 compared with the previous close of 61.44. Banks are set to take a hit on their treasury portfolio in this quarter as the yield on the 10-year government bond rose by 146 basis points since the start of this quarter. The yield was at 7.44 per cent on June 30. "Banks are in a position where they can neither cut their losses nor go for fresh purchases of government bonds," said Anoop Verma, vice-president (treasury), Development Credit Bank. According him, the yield on the 7.16 per cent 2023 government bond might touch nine per cent this week.
Currency dealers say the rupee might dip further to touch a fresh new low this week on heavy dollar demand and defence-related payments. The negative sentiment in the equity market is also affecting it.
The negative sentiments prevailing in the equity market is also affecting the rupee against the dollar.
Even though the government's as well as the Reserve Bank of India's (RBI) recent measures to help the rupee have failed, the Street expects further steps soon.