Rupee falls, bond yields higher ahead of inflation data
Premium- Indian government bond yields were higher in early trades on Friday
The Indian rupee opened marginally lower to the U.S. currency on Friday, as traders awaited the retail inflation data and eyed whether there will be any follow-through dollar demand, whereas the government bond yields were higher in early trades on Friday, tracking a spike in US Treasury yields.
The rupee was trading at 79.6750 per dollar as compared to 79.63 in the previous session. The 10-year bond yield was trading at 7.30% as compared to closing at 7.26% on Thursday.
The currency crossed the 80 level last month on the back of monetary policy tightening and the consequent FPI outflows from capital markets. India’s widening trade gap and capital outflows have also raised the risks for the domestic currency.
Foreign Portfolio Investors (FPIs) had been selling equities in the Indian markets for the past nine-to-ten months. After nine months of outflows, foreign institutional investors (FIIs) turned net buyers of Indian stocks in July and August.
The RBI governor Shaktikanta Das while announcing the monetary policy last week said the central bank remains watchful and focused on maintaining stability of the Indian rupee.
Indian government aims to raise $4.02 billion through sale of bonds, as per Reuters report. A Reuters poll of economists expects July inflation to temper down to 6.78% from 7.01% in June and the near eight-year high of 7.79% in April. Stubborn inflation has been a major concern for the Reserve Bank of India (RBI) despite the central bank raising key policy rate by 140 basis points since May.
RBI had slashed the repo rate in March, 2020 with an aim to cushion the impact of covid-induced lockdown, and maintained status-quo in the benchmark interest rate for almost two years before increasing it on May 4, 2022.
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