Written by Dharamraj Dutia and Jaspreet Kalra
Mumbai, November 6 (Reuters) – The Indian rupee and bond yields will be guided by developments in US Treasury yields, while bond traders will keep an eye on the central bank’s actions on bond sales during the week.
Rupees INR=IN Friday’s closing price was 83.2850 per dollar, a slight decline for the week. The local unit hit an all-time low of 83.2950 last Wednesday.
A new lifetime low “looks pretty much out of the question” after U.S. yields have fallen “significantly”, a currency trader at a bank said. He expects a range of 83-83.25 this week.
U.S. Treasury yields fell further on Friday after data showed the U.S. labor market is softening, raising hopes that the Federal Reserve will stop raising interest rates.
U.S. nonfarm payrolls rose by 150,000 last month, after rising by 297,000 in September, compared with the 180,000 expected by economists polled by Reuters. Additionally, the unemployment rate rose and fewer jobs were added in August and September than previously expected.
“This data helps to solidify the view that FOMC tightening is over, with markets currently pricing in virtually no risk of a rate hike in December, and that the Fed may not be able to do so again this cycle,” ANZ said in a note. “There’s only about a 10% chance of a rate hike.”
The dollar index fell about 1% on Friday, and the yield on the 10-year U.S. Treasury note fell to its lowest level in more than a month. US stocks rebounded.
On the other hand, India’s benchmark 10-year bond yield is IN071833G=CC Last week, it followed a steep decline in US yields, closing 4 basis points lower at 7.3140%.
The yield on the U.S. 10-year Treasury note fell 29 basis points last week, ending Friday at 4.5580%, as the market expects the Fed to keep interest rates unchanged following the status quo at its past two policy meetings.
“Bond yields remain within a narrow range and we do not expect them to break much out of this range. Even US yields have fallen due to temporary positions and will rise again to 4.80-5.00. It should settle down to a level of 1%.” A. Prasanna, Head of Research, ICICI Securities Primary Dealership, said:
The Fed may not raise rates again, but it likely won’t cut them in the first six months of 2024, he added.
Banks informed the central bank that plans to sell government bonds and intervene in the foreign exchange market were problematic. harm a transaction Four bank officials told Reuters the scale of the deal was large.
Yields on Indian government bonds have continued to rise since the Reserve Bank of India announced plans to sell bonds in early October, but they remain in a narrow range and volume has dried up.
Banking system liquidity has been in the red since then, but it eased sharply last week, raising the possibility of an upcoming auction.
** U.S. International Trade Deficit for September – Tuesday, November 7th (7:00 p.m. ET)
** U.S. First Weekly Unemployment Claims Week runs from October 30th to Thursday, November 9th (6pm IST)
** India September Industrial Production – Friday, November 10th (5:30pm ET)
** US November U Mich Sentiment Preliminary – Friday, November 10th (8:30 PM IST)
(Reporting by Dharamraj Dhutia and Jaspreet Kalra; Editing by Sohini Goswami and Dhanya Ann Thoppil)
((Dharamraj.dhutia@tr.com))
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