There is a consensus among bankers about the gradual appreciation of rupee this year. On the interest rate front, however, the views are divergent.

The US Federal Reserve's firm resolve to keep dollar low seems to be the trigger for appreciation with the range varying between 44.00 and 45.00.

The downside is limited to 45.75 to a dollar amid RBI intervention. In bond market, the yield on 10-year year benchmark is expected to be rangebound with the upside touching 5.90 per cent as credit offtake is likely to be buoyant given the robust economic recovery.

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Whatever may be the ranges for the movement of the yields, the entire market has come to terms with the fact that rapid fall in yields is capped as rates are set to consolidate at present levels, at least in the long term.

According to S A Bhat, general manager, treasury, Bank of India, interest rates are set to go up backed by credit growth.

He said the 10-year yield in 2004 will hover around 5.60-5.90 per cent. On the rupee front, he said the currency will remain strong, gaining from 45.25 towards the first half to 45.00 during the later part of the year.

A contrasting projection was put by Partha Mukerjee, head of treasury, UTI Bank. He said interest rates have not yet bottomed out and definitely not in the short term.

It will see a two-way movement with the 10-year yield ranging between 5.10 per cent and 5.30 per cent. While yields towards later part of the year might go up following economic growth, abundant liquidity will push short-term rates lower.

He also maintained that rupee will remain strong with spot ruling around 45.25 for the first six months of the calendar year.

Head of treasury at Develoment Credit Bank, K Harihar, stated that yields might not go up immediately owing to liquidity but down the line the 10-year will figure in the range of 5.20-5.30 per cent after remaining flat for the first three months of the year.

Echoing not a very optimistic note for rupee he said: "With imports going up to support economic growth and inflows not expected to be moderate, the rupee will be range bound in 45.25-45.75 to a dollar".

On the other hand, Amit Bansal, head-treasury of Barclays Bank, was of the view that rupee will appreciate and the calendar year will see it touching 44-44.50 buoyed by weak dollar and healthy inflows NRI and FDI inflows.

He felt that interest rates will remain rangebound as downward trend is capped by credit growth, while the upside is also limited by abundance of liquidity. This will make the 10-year yield move between 5.05-5.55 per cent.

According to K B Ramesh, treasury head of Global Trust Bank, interest rates have bottomed out and the rupee stands to gain owing to inflows backed by good economic fundamentals.

The yield on 10-year benchmark, he said, will sway between 4.90 per cent and 5.10 per cent. The rupee will remain rangebound around 45.00-45.25 to a dollar.