India rupee to take cues from greenback path, tariff response; bonds to eye liquidity strikes

By Dharamraj Dhutia and Nimesh Vora

MUMBAI, Feb 17 (Reuters) – The Indian rupee’s route this week shall be formed by the greenback’s response to its current correction and whether or not worries over U.S. tariffs proceed to subside, whereas the bond market shall be on look ahead to any additional liquidity infusion measures by the central financial institution.

The rupee ended at 86.8225 per U.S. greenback on Friday, having rallied 0.7% within the week in what was its finest efficiency in additional than one-and-a-half years.

That was largely because of the Reserve Financial institution of India’s heavy intervention, whereas an extra increase got here from the dearth of any U.S. tariffs carried out final week, as U.S. President Donald Trump had stated would occur.

Kunal Kurani, affiliate vp at Mecklai Monetary, famous that after the rally, which possible squeezed out positions, the rupee is anticipated to extra broadly monitor the greenback’s transfer.

The greenback index declined about 1% final week — and is down about 3% from the year-to-date excessive — as Washington’s reciprocal tariffs weren’t instantly imposed.

Kurani stated any developments associated to tariffs will stay in focus, which he cautioned, may stymie the rupee’s restoration.

The foreign money is anticipated to be within the vary of 86.50-87.20, merchants stated.

Whereas the rupee rallied, the benchmark 10-year bond yield was largely unchanged, ending at 6.7071% on Friday.

Merchants anticipate the yield to commerce within the 6.65%-6.75% vary this week.

The slim 6.68%-6.73% vary final week was as a consequence of cautious sentiment after the RBI largely doused hopes of further liquidity infusion.

The RBI reduce rates of interest by 25 foundation factors the week earlier than however didn’t unveil contemporary liquidity injection measures. As a substitute, its commentary was additionally on the cautious facet, based on market contributors.

“We retain a view of a 25 bps fee reduce within the April assembly, adopted by one other reduce later within the fiscal 12 months (possible in October, whilst we’re extra agnostic concerning the timing of that),” ICICI Securities Main Dealership stated in a be aware.

It added that the minutes of the RBI’s coverage assembly, due on Friday, will present extra cues.

Over the previous month, the central financial institution has infused 2.68 trillion rupees ($30.88 billion) into the banking system.

This consists of 600.20 billion rupees of open market bond purchases, 388.15 billion rupees of secondary bond purchases, round 440 billion rupees through a greenback/rupee swap and 1.25 trillion rupees by means of a long-term repo.

It’s scheduled to purchase bonds price 400 billion rupees on Thursday.

The market, nevertheless, is awaiting the following set of steps from the central financial institution, on condition that liquidity is ready to tighten additional within the run-up to the tip of the monetary 12 months.

** February HSBC Flash manufacturing, providers and composite PMI – February 21, Friday (10:30 a.m. IST)

** Minutes of Reserve Financial institution of India’s February financial coverage assembly – February 21, Friday (5:00 p.m. IST)

** January housing begins – February 19, Wednesday (7:00 p.m. IST)

** Preliminary weekly jobless claims for week to February 10 – Feb. 20, Thursday (7:00 p.m. IST)

** February Philly Fed Enterprise Index – February 20, Thursday (7:00 p.m. IST)

** February S&P World Flash manufacturing, providers and composite PMI – February 21, Friday (8:15 p.m. IST)

** January present dwelling gross sales – February 21, Friday (8:30 p.m. IST)

** February U Mich sentiment – February 21, Friday (8:30 p.m. IST) ($1 = 86.7890 Indian rupees) (Reporting by Dharamraj Dhutia and Nimesh Vora; Modifying by Savio D’Souza)