MUMBAI
\nThe Indian rupee and government bond yields are expected to be rangebound in the week before a critical US Federal Reserve meeting, with the latter likely to trade with an easing bias, as markets await fresh cues.
\nThe rupee finished at 82.09 per dollar last Friday, down 0.30% for the week to snap a four-week winning streak.
\nThe currency was pressured by a resurgent dollar index and rising US yields, as expectations of another Fed rate hike were bolstered by central bank officials expressing concerns about inflation and mixed economic data.
\nA 25-basis-points (bps) hike at the Fed\u2019s May 2-3 meeting was fully priced in, but there was uncertainty about whether another hike would be needed and when would rate cuts begin.
\nTrading could remain choppy in the near term amid a lack of triggers and following an apparent slowdown last week in foreign investor inflows into Indian equities, traders said.
\n\u201cThe rupee could move within a broad 81.50 to 82.50 range,\u201d said Anil Bhansali, head of treasury at Finrex Treasury Advisors, with the possibility it stays within a very narrow 81.90 to 82.35 band this week.
\nUS personal consumption expenditures (PCE) price index data, the Fed\u2019s preferred inflation gauge, due on Friday, would be important.
\nMeanwhile, India\u2019s benchmark bond yield ended at 7.1856% on Friday.
\nIt fell four bps last week, as against remaining largely unchanged in the previous week. Traders expect the benchmark yield to move in the 7.15%-7.24% range this week.
\nBond yields fell across the board on Friday after stronger-than-expected demand at a debt auction triggered heavy short covering. \u201cThere was good demand at the debt auction, and post that short covering multiplied the impact.
\nSome incremental accretion of small savings deposits is also leading to investment in bonds,\u201c said VRC Reddy, treasury head of Karur Vysya Bank.
\nThe decline in bond yields came despite the minutes of the Reserve Bank of India\u2019s latest meeting tilting towards hawkishness.
\nIndia\u2019s current rate tightening cycle may not be over as more hikes could be warranted to align inflation towards the central bank\u2019s medium-term target of 4%, according to the minutes.
\nThe RBI had surprised markets by holding the key lending rate at 6.50% on April 6, going against expectations of a 25 basis point hike.
\n\u201cEven as the minutes seem disconnected from the vote shift, we think the bar to raise rates will only get higher from here on,\u201d said Madhavi Arora, lead economist at Emkay Global.<\/p>\n","protected":false},"excerpt":{"rendered":"
MUMBAI The Indian rupee and government bond yields are expected to be rangebound in the week before a critical US Federal Reserve meeting, with the latter likely to trade with an easing bias, as markets await fresh cues. The rupee finished at 82.09 per dollar last Friday, down 0.30% for the week to snap a […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-327323","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n