The MPC minutes may not be a major event for the rupee, but any surprise commentary from the Federal Reserve's latest policy meeting could take the currency out of its 82.30-83.00 range against the dollar, said a forex dealer with a state-run bank. The rupee was at 82.83 against the dollar on Friday, having logged its fourth consecutive weekly decline amid worries over the Fed's rate hike trajectory. The Fed's policy rate is currently in a 4.50%-4.75% target range. Two Fed officials said last Thursday that the U.S. central bank likely should have lifted rates more than it did earlier this month and warned that additional hikes were essential to lower inflation back to desired levels. "The forex market will be more inclined to see if the recent comments by two Fed officials were a one-off or reflect the U.S. central bank's thinking going forward," said Anindya Banerjee, head of research for forex and interest rates at Kotak Securities. Banerjee expects the rupee to stay in the range of 82.50-83.10 against the dollar this week. KEY EVENTS: U.S. Feb S&P Global Mfg and Svcs PMI flash - Feb 21, Tuesday (8:15 p.m. IST) U.S. Federal Reserve Feb meeting minutes - Feb 23, Thursday (12:30 a.m. IST) U.S. Q4 GDP 2nd estimate - Feb 23, Thursday (7:00 p.m. IST) U.S. Jan Core PCE Price Index - Feb 24, Friday (7:00 p.m. IST) (Reporting by Siddhi Nayak; Editing by Dhanya Ann Thoppil)
By Siddhi Nayak
MUMBAI, Feb 20 (Reuters) - Indian government bonds and
the rupee are likely to begin the week on a quiet note, taking
cues from the minutes of the latest U.S. and Indian central
banks' policy meetings, due over Wednesday and Thursday.
The benchmark government bond yield ended at
7.3889% on Friday, up three basis points (bps) for the week as a
jump in monthly domestic retail inflation and the Reserve Bank
of India's (RBI) surprise devolvement of notes at a weekly
auction hurt sentiment.
Inflation rose to 6.52% in January, above economists'
expectations as well as the upper end of the RBI's tolerance
band of 2%-6%, vindicating the central bank's hawkish monetary
policy stance earlier this month.
The RBI's monetary policy committee (MPC) had raised the
repo rate by 25 bps to 6.50% on Feb. 8, as was widely expected,
but left its policy stance unchanged, leaving the door open to
more tightening.
"The commentary from the MPC members will be crucial,
especially where they see inflation going forward," said Ritesh
Bhusari, deputy general manager for treasury at private sector
lender South Indian Bank.
The divergence in views of the panel members could be the
key thing to gauge, added Bhusari.
Traders expect the benchmark bond yield to trade in a
range of 7.32% to 7.42% this week.
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