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The rupee enjoys a strengthening bias this week due to capital inflows expected on the back of measures taken by the Reserve Bank of India (RBI). However, later during the week, the movement would be determined by the outcome of the meeting of the US Federal Open Market Committee (FOMC) and RBI's own mid-quarter review of the monetary policy.
On Friday, the rupee ended at 63.50, compared with the previous close of 63.54 a dollar.
According to currency dealers, the marginal strengthening was due to dollar sale by state-run banks on behalf of RBI. The rupee had opened at 63.73 and during intra-day trades, touched a high of 63.37 and a low of 64.18 a dollar.
According to N S Venkatesh, chief general manager and head of treasury, IDBI Bank and chairman of the Fixed Income Money Market and Derivatives Association of India, the rupee would trade this week in a range of 62.50 to 63.50 a dollar.
The street has factored in tapering of US Federal Reserve's quantitative easing by up to $15 billion beginning October. But if the FOMC hints at a more hawkish stance, the rupee is expected to come under pressure. Besides, month-end dollar demand from importers would emerge. Experts believe RBI would continue to intervene in the market when the rupee comes under pressure.
Meanwhile, government bond yields would track the movement against the dollar. The yield on the 10-year benchmark government bond 7.16 per cent 2023 ended at 8.49 per cent, compared with the previous close of 8.50 per cent. Government bond dealers expect the yield on the 10-year benchmark to trade in the range of 8.4-8.5 per cent this week.
