Rupee seen volatile; govt bonds range-bound

Last Updated: Mon, May 27, 2013 05:15 hrs
Cashier counts currency notes inside bank in Lucknow

The rupee is expected to trade volatile with a weakening bias this week due to month-end dollar demand from exporters and payments towards external commercial borrowings.

"The rupee will trade in the range of Rs 55.5-56 with a weakening bias," said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai. It ended at Rs 55.65 on Friday compared with the previous close of Rs 55.59. Last week, it was the longest weekly-losing streak for the rupee against the dollar since late November. The strengthening of the dollar against other global currencies resulted in the fall of the rupee.

Government bond yields are expected to be range bound as hopes of a repo rate cut in the mid-quarter review of the monetary policy on June 17 has already been factored in by the street.

The new 10-year government bond 7.16 per cent 2023 closed down four basis points at 7.11 per cent. The rally in the government bond market was due to expectations of a repo rate cut.

The market is expecting the Reserve Bank of India (RBI) will cut the repo rate by a further 25 basis points on June 17. In the annual monetary policy held on May 3, the repo rate was cut by 25 basis points.

"There is no negativity expected. But at the same time, the market has already factored in a further cut in the repo rate next month. From here to June 17, I see the yield trading in the range of 7.10-7.20 per cent," said Mohan Shenoi, president - group treasury and global markets, Kotak Mahindra Bank.

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