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Rediff.com  » Business » Rupee may strengthen on dollar inflows

Rupee may strengthen on dollar inflows

October 21, 2013 10:40 IST

RupeeThe rupee is expected to strengthen this week as currency dealers see dollar inflows from foreign investors due to a rise in domestic stocks.

While government bond yields might rise, as there are expectations that the Reserve Bank of India might increase the repo rate in the second quarter monetary policy review due to high inflation.

Currency dealers see the rupee trading in the range of 60.80 and 61.90 this week and the bias is towards strengthening.

The strengthening would be despite month-end dollar demand from importers.

“Inflows from foreign institutional investors will be there to support the rupee,” said a current dealer with a public sector bank.

On Friday, the rupee ended at 61.27, compared with the previous close of 61.22 a dollar.

The rupee had opened at 61.19 and during intra-day trades, it touched a high of 60.93, a level last seen on August 8.

The rupee had ended at 60.86 to a dollar on August 8. The intra-day low for the rupee was 61.71 to a dollar in afternoon trades.

On Friday, RBI also assured the Street that oil marketing companies’ swap window, provided to three public sector OMCs, remains operational.

Government bond yields might rise as inflation is again a concern.

Many experts are expecting Reserve Bank of India to once again increase the repo rate later this month to contain inflation.

The repo rate currently stands at 7.50 per cent and it was raised by 25 basis points in the mid-quarter review of monetary policy last month.

“The yield on the 10-year benchmark government bond 7.16 per cent 2023 might trade in the range of 8.50 to 8.70 per cent,” said a government bonds dealer with a private bank.

The yield on the 10-year government bond 7.16 per cent 2023 ended at 8.60 per cent, compared with the previous close of 8.66 per cent.

On Friday, the yield fell as sentiment had improved after RBI said it would keep the OMCs’ swap window operational.

BS Reporter in Mumbai
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