The first round of French elections encouraged the euro and pound to rise, the dollar index weakened, so all major currencies rose against the dollar.
“We should have appreciated (the rupee), but we depreciated a bit because on the debt side, inflows were not as expected and manufacturing PMI numbers were slightly lower than expected,” said Dilip Parmar, research analyst at HDFC Securities.
Currency traders expect the rupee to remain in the range of 83.30 to 83.65 per US dollar in the coming week.
“If something happens globally, the RBI will intervene. And a small intervention would be enough to manage USD-INR, but major intervention happens when something big happens globally”, market participants said.
The benchmark 10-year bond yield is trading flat, but traders say these levels are good. “There seems to be buying from mutual funds today. They were sold during the end of the quarter so they have to replenish their kitty”, they said.
Liquidity eased slightly as the month saw around Rs. 28,000 crore due to government expenditure.
Last week on Friday, the call yield rose to 7.10% and the average call rate stood at 6.85%.
Participants expect liquidity to ease further in September if the monsoon holds good and major global events unfold as expected.
“The first sign of easing liquidity is the call rate going below 6.50%, the second thing is a change in trend and then a rate cut. But there are many conditions that come into play, such as the US election”, bond traders said.
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