By Anushka Trivedi and Dharamraj Dhutia
MUMBAI, March 13 (Reuters) - The Indian rupee is
expected to stay resilient in a data-packed week, while
government bond yields are seen tracking U.S. yields.
The rupee ended little changed at 82.04 per dollar
last week but held up better than its Asian counterparts, which
tumbled after the Federal Reserve Chair Jerome Powell
effectively promised more interest rate hikes.
The local currency would probably hold its recent
81.80-82.50 range, barring any big surprises in the U.S.
inflation data due mid-week, traders said.
Markets have already raised their expectations of a 50-basis
point (bps) hike, but the rupee didn't react much thanks to
rising capital inflows as the fiscal year draws to a close.
"If the dollar index rises (to 106-levels), the rupee may
come under some pressure but remain within its narrow range and,
hence, show resilience in a broader sense," said Jigar Trivedi,
senior research analyst, currencies and commodities at Reliance
Securities.
Only major triggers such as foreign investor inflows and
dollar depreciation could make it breach the lower end of the
range, he added.
Also due over the course of the week is India's February
trade data. A sequential decline in trade deficit could spark a
cut in the fiscal 2023 current account deficit estimates and
emerge as a big boost to the rupee, economists have said.
India's benchmark bond yield ended lower at
7.4321% on Friday, tracking a decline in U.S. yields, especially
on the shorter end.
However, the yield was nearly flat for a second consecutive
week, after having risen by an aggregate of 15 bps in the three
preceding weeks.
Retail inflation in India likely eased to 6.35% in February,
but stayed above the Reserve Bank of India's (RBI) upper
threshold for a second straight month, a Reuters poll of 43
economists showed.
If there are any major downside surprises in inflation,
yields of longer-duration bonds may ease but the move in
shorter-tenor yields is expected to remain capped on bets of
tighter liquidity conditions in the coming weeks, traders said.
Market participants expect the benchmark bond yield to move
in the 7.38%-7.48% band this week, the range being a strong
technical upside and downside.
"We expect bonds to remain volatile because of renewed rate
hike fears. The risks of the 10-year testing the upside are more
because of renewed inflationary pressures," said Parijat
Agrawal, fixed income head at Union Asset Management.
"We expect the RBI to hike rates by 25 bps in April as core
inflation remains sticky."
KEY EVENTS:
* India Feb CPI Inflation - March 13, Monday (5:30 p.m. IST)
* India Feb WPI Inflation - March 14, Tuesday (12:00 p.m.
IST)
* U.S. Feb CPI - March 14, Tuesday (6:00 p.m. IST)
* China Feb Industrial Output - March 15, Wednesday (7:30
a.m.
IST)
* China Feb Retail Sales - March 15, Wednesday (7:30 a.m.
IST)
* U.S. Feb Retail Sales - March 15, Wednesday (6:00 p.m.
IST)
* U.S. Feb Industrial Production - March 17, Friday (6:45
p.m.
IST)
* India Feb trade data - March 10-17
(Reporting by Anushka Trivedi and Dharamraj Dhutia; Editing by
Janane Venkatraman)
anushka.trivedi.thomsonreuters.com@reuters.net))
