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Rediff.com  » Business » Why the rupee is expected to fall

Why the rupee is expected to fall

By BS Reporter
September 07, 2015 09:13 IST
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DollarsDuring the week, the Indian currency weakened by 31 paise

The rupee is expected to slide further against the dollar this week, as dollar buying by companies is seen as continuing.

There are also concerns in the market ahead of the two-day meeting of the Federal Open Market Committee of the US central bank, on September 16-17.

US data issued on Friday showed addition of 173,000 jobs in August, less than expected.

However, job gains in prior months were revised higher and the unemployment rate was pegged at a seven-year low at 5.1 per cent.

“The rupee is biased towards weakening and the range might be 66.25-67 a dollar this week,” said Sandeep Gonsalves, foreign exchange consultant and dealer, Mecklai & Mecklai.

On Friday, the rupee had ended at 66.47, from Thursday’s 66.24.

During the week, it weakened by 31 paise.

The Reserve Bank of India’s foreign exchange reserves fell by $3.43 billion for the week ending August 28, to $351.92 billion.

A key reason was its intervention in the market to arrest volatility in the rupee.

Meanwhile, government bond yields are seen falling, with expectation building up for a rate cut in September by RBI, on the back of easing retail inflation.

Consumer Price Index inflation fell to 3.78 per cent in July from 5.4 per cent in June.

“There is an expectation in the market that RBI could cut the rate this month.

"If that holds, the yield on the 10-year benchmark bond could trade between 7.72 and 7.68 per cent this week.

"There has been buying in bonds from the banking sector,” said N S Venkatesh, executive director and head of treasury at IDBI Bank.

On Friday last week, the yield on the 10-year benchmark ended stable at 7.75 per cent.

During the week, it fell by three basis points.

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BS Reporter in Mumbai
Source: source
 

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