Indian rupee likely to be rangebound, bond traders eye US peers

Indian rupee likely to be rangebound, bond traders eye US peers


By Jaspreet Kalra and Bhakti Tambe

Indian rupee likely to be rangebound, bond traders eye US peers

MUMBAI, – The Indian rupee is expected to remain rangebound this week as traders watch out for remarks from Federal Reserve policymakers that may offer clues on interest rate cuts this year, while domestic bond yields will track moves in U.S. peers.

The rupee closed at 83.94 against the U.S. dollar on Friday, little changed week-on-week.

While outflows from local equities and strong dollar demand from importers have squeezed the rupee, routine interventions by the Reserve Bank of India have helped it hold above the psychologically important 84-handle.

Overseas investors have sold Indian stocks worth over $2.5 billion in August so far. The rupee hit an all-time low of 83.9725 on Aug. 7.

Given recent gains in its Asian peers, the rupee is due for some appreciation but gains are likely to be capped near 83.60-83.70, Dilip Parmar, a foreign exchange research analyst at HDFC Securities, said.

Meanwhile, recent upbeat economic data in the United States quelled concerns about a slowdown in the economy and prompted a paring of bets on aggressive rate cuts.

Investors will keep a tab on remarks from Fed policymakers, including Chair Jerome Powell on Friday, to gauge the pace and extent of rate reductions.

Investors expect the Fed to ease policy rates by a little more than 90 basis points in 2024.

Minutes of the Fed’s most recent meeting, due on Wednesday, are also expected to offer insights into policymakers’ opinions of the interest rate trajectory.

Meanwhile, the Indian 10-year government bond yield ended at 6.8700% on Friday and was down 1 basis points last week, tracking a decline in U.S. Treasury yields.

Traders expect the benchmark yield to move in the 6.85% to 6.95% range as it awaits strong directional cues.

“Inflows from foreign portfolio investors and the start of monetary easing cycle in the developed economies are supporting bond yields,” said Puneet Pal, fixed income head at PGIM India Mutual Fund.

Market participants will also await minutes from the RBI’s latest meeting, due on Thursday, especially as the Fed is expected to begin its policy easing cycle.

Earlier this month, the RBI kept its key interest rate unchanged, maintaining its focus on bringing down inflation amid a hawkish policy stance.

Investors were hopeful the central bank would soften its overall stance on inflation following a recent souring of global market sentiment and firmer expectations of Fed rate cut in September.

PGIM’s Pal expects the status quo on Indian policy rates to continue till the end of 2024 and rate cuts to begin from next year in response to high real rates and global monetary easing amid moderating growth.

KEY EVENTS: ** U.S. Federal Open Market Committee’s minutes from July 30-31 meeting – Aug. 21, Wednesday

** The Reserve Bank of India Monetary Policy Committee’s minutes from Aug. 6-8 meeting – Aug. 22, Thursday

** U.S. initial weekly jobless claims week to Aug. 17 – Aug. 22, Thursday

** U.S. August S&P Global manufacturing PMI flash – Aug. 22, Thursday ** U.S. July existing home sales – Aug 22, Thursday

** U.S. July new home sales – Aug. 23 Friday

This article was generated from an automated news agency feed without modifications to text.



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