By Dharamraj Dhutia and Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee is likely to trade with a positive bias this week, bolstered by a pickup in portfolio inflows and a weaker dollar while government bonds are expected to take direction from the central bank’s latest policy meeting minutes.
The rupee closed at 85.3675 on Thursday, up nearly 0.8% on the week. Indian financial markets were closed on Good Friday.
Bullish bets on the rupee have picked up as the dollar remained under pressure from U.S. tariff related concerns, a Reuters poll showed. Traders said increased foreign buying of Indian stocks has also supported the currency. Foreign investors net bought over $1.5 billion of Indian stocks last week, per provisional exchange data.
Early signs of de-escalation in the U.S.-China trade war could also help Asian currencies this week.
In the near-term, the dollar-rupee pair is expected to trade between 85 and 85.80 with “upticks to be sold,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
With data calendars relatively light in U.S. this week, investors will keep an eye on remarks from Federal Reserve policymakers and signs of progress in individual countries’ trade talks with the White House.
Meanwhile, the benchmark 10-year bond yield ended at 6.3709% on Thursday, its lowest level since December 2021, and fell 7 basis points for the week.
The 10-year bond yield has now dropped for five consecutive weeks, posting an aggregate decline of 33 bps.
Markets expect the yield to hover between 6.30% and 6.40%, with central bank’s debt purchase and minutes of the monetary policy meeting acting as major triggers.
The RBI had lowered its key policy rate by 25 basis points for a second time earlier this month, coupled with a change in stance to “accommodative”.
The central bank governor had also said the RBI is looking to maintain surplus liquidity at around 1% of deposits in the banking system.
Economists expect the central bank to cut interest rates more than previously thought, as slowing growth and lower inflation give it room to act. Retail inflation in March fell to its lowest level since August 2019.
Latest data, together with prediction of above-normal monsoons indicate back-to-back rate cuts in the June and August policy meetings are now more likely, ICICI Securities Primary Dealership said.
“Moreover, risk clearly is that soft inflation (that averages between 3.5 to 4%) creates scope for additional easing beyond August meeting,” it added.
KEY EVENTS: India ** India April HSBC Flash manufacturing, services and composite PMI – April 23, Wednesday (10:30 a.m. IST) ** Minutes of Reserve Bank of India’s February monetary policy meeting – April 23, Wednesday (5:00 p.m. IST) U.S. ** April S&P Global Flash manufacturing, services and composite PMI – April 23, Wednesday (7:15 p.m. IST) ** March new home sales – April 23, Wednesday (7:30 p.m. IST) ** March durable goods – April 24, Thursday (6:00 p.m. IST) ** Initial weekly jobless claims for week to April 14 – April 24, Thursday (6:00 p.m. IST)
** March existing home sales – April 24, Thursday (7:30 p.m. IST) ** April U Mich sentiment – April 25, Friday (7:30 p.m. IST)
($1 = 85.4290 Indian rupees)
(Reporting by Dharamraj Dhutia and Jaspreet Kalra; Editing by Nivedita Bhattacharjee)
