Rupee likely to hold current range while bond yields expected to track US peers
By Dharamraj Dhutia and Jaspreet Kalra
MUMBAI, June 18 (Reuters) -The Indian rupee is likely to hold its currenttrading range and move sideways this week, with the central bank's interventionexpected to limit losses amid pressure on Asian currencies, while bonds may trackmoves in U.S. Treasuries.
The rupee INR=IN closed at 83.5550 against the U.S. dollar on Friday, down 0.2% for theweek and just shy ofits record low of 83.5750 hit in April.
Indian financial markets were shut on Monday for a local holiday.
The dollar index rose week-on-week, while most Asian currencies slipped last week. Regular interventions by the Reserve Bank of India (RBI) across market segmentslast week helped the rupeeremain above its lifetime low, traders said.
Theyexpect the rupee to driftbetween 83.30 and 83.60 this week.
"The bump up in thedollar index and easingAsian currencies will keep depreciation bias on the rupee this week," but the RBI is expected to limit sharp swings, saidAbhilash Koikkara, head of forex and commodities at Nuvama Professional Clients Group.
The focus this week will be on remarks from U.S. Federal Reserve policymakers as markets digest their hawkish interest rate projections, even as recentdata has signaled that inflation is cooling in the world's largest economy.
Investors will also keep an eye on economic data, such as U.S. retail sales on Tuesday, and the Bank of England's policy decision on Thursday.
Meanwhile, the 10-year Indian government bond yield IN071034G=CC ended at 6.9832%% on Friday, easing three basis points (bps),after rising the previous week.
Traders expect the benchmark yield to move in the 6.96%-7.04% range this week. They will also monitorU.S. yields andforeign flows as the deadline for inclusion in JPMorgan's emerging market debt index nears.
Bond yields declined last week, tracking a drop in U.S. yields, which eased after softer-than-expected inflation prints in the country boostedbets that the Fed will cut rates twice in 2024.
The 10-year U.S. yield dropped over 20 bps last week and was around the4.25% mark, even as the Fed slashed its rate cut forecast to 25 bps for 2024, from 75 bps in March.
Separately,foreign inflows slowed but remained in positive territory, with traders anticipating a pick-up inbonds after they are includedin the JPM index at theend of this month.
Traders will also remain focused on the minutes of the RBI'slatest monetary policy meeting, due on Friday.
The central bank maintained status quo on policy rates and itsstance earlier this month, while keeping theoutlook on inflation unchanged and warned of persistent price pressures on food.
"We do believe central bank is in a position to continue to wait for more clarity on domestic and global factors to consider a rate cut and clarity on Fed outlook should be seen in that context," said A Prasanna, head of research at ICICI Securities Primary Dealership, who believes the RBI could change itsstance in thenext two meetings.
KEY EVENTS:
** U.S. May retail sales - June 18, Tuesday (6:00 p.m. IST)
** U.S. May industrial production - June 18, Tuesday (6:45 p.m. IST)
** U.S. May housing starts - June 20, Thursday (6:00 p.m. IST)
** U.S. initial weekly jobless claims - week to June 10 - June 20, Thursday (6:00 p.m. IST)
** Bank of England interest rate decision - June 20, Thursday (4:30 p.m. IST)(Reuters poll - no change)
** U.S. June Philly Fed Business Index - June 20, Thursday (6:00 p.m. IST)
** Minutes of India's Monetary Policy Committee's June policy decision - June 21, Friday (5:00 p.m. IST)
** U.S. S&P Global June manufacturing, services and composite PMI - June 21, Friday (7:15 p.m. IST)
** U.S. May existing home sales - June 21, Friday (7:30 p.m. IST)
Reporting by Dharamraj Dhutia and Jaspreet Kalra; Editing by Sonia Cheema
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