WEEKAHEAD-Indian rupee, bond yields seen rangebound in final week of FY23

By Anushka Trivedi and Dharamraj Dhutia MUMBAI, March 27 (Reuters) - The Indian rupee will take cues from any developments in the global banking crisis but stay within its recent range, while government bond yields are seen trading largely unchanged in the final week of the current financial year. The Indian rupee finished last week nearly flat at 82.48 per dollar, as fears over the banking crisis in Europe accelerated on Friday and caused the local currency to erase all of its weekly gains. Earlier, increasing bets of a Federal Reserve pause after the U.S. central bank hiked rates by 25 basis points (bps) and softened its hawkish tone had buoyed Asian currencies. "The market is still wary of the fact that more banks could fail and was unsure about inflation and rates," said Anil Bhansali, head of treasury at Finrex Treasury Advisors. The rupee may trade between 82-82.80 this week, with either ends being tested by the banking crisis, said a private bank trader, although year-end related inflows could halt a rapid depreciation. Meanwhile, India's benchmark bond yield fell 4 bps last week to end at 7.3128% on Friday, tracking similar move in U.S. yields on dovish Fed expectations. Back home, traders expect the Reserve Bank of India (RBI) to hike the repo rate in April, as inflation stayed elevated.

"Upside risk to the RBI's January-March inflation forecast, and firm core prints are likely to see a majority in the MPC lean towards a 25 bps hike in April, with an unchanged stance," said Radhika Rao, executive director and senior economist at DBS Bank.

"Beyond that, we expect a pause on rates to allow the lagged impact of hikes to filter through, a likely benign inflation profile (with an eye on risks) and attention on growth conditions." Major focus for bond market participants in the current week would be the borrowing calendar for April-September. The Indian government's borrowing for April-September is expected to be between 55% and 58% of its gross annual borrowing target of 15.43 trillion Indian rupees ($187.07 billion), government officials told Reuters earlier this month. The government is likely to meet central bank officials to discuss a plan on Monday, and the calendar is likely to be published next week. Market participants expect the benchmark bond yield to move in the 7.30%-7.40% band this week. India's foreign exchange and debt markets will be shut on Thursday for a local holiday. ($1 = 82.4825 Indian rupees)

KEY EVENTS:
* India Q4 current account data - March 24-31 (5:00 p.m. IST)
* U.S. Q4 GDP final - March 30, Thursday (6:00 p.m. IST)
* U.S. Q4 Core PCE Prices Final - March 30, Thursday (6:00 p.m. IST)
* U.S. Feb Core PCE Price Index - March 31, Friday (6:00 p.m. IST)
* Eurozone March HICP Flash - March 31, Friday (2:30 p.m. IST) (Reporting by Anushka Trivedi and Dharamraj Dhutia Editing by)

Reuters

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WEEKAHEAD-Indian rupee, bond yields seen rangebound in final week of FY23

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