WEEKAHEAD-INDIA-Rupee may slip to 82/USD, bond yields stay range-bound with Fed mins awaited

MUMBAI, Nov 21 (Reuters) - Indian government bond yields are expected to stay range-bound this week, while the rupee may slip further but stay in a narrow band, with the 82-per-dollar mark considered a key support, ahead of the minutes of the U.S. central bank’s latest meeting.

The rupee tumbled after nearly touching 80.50 per dollar last Monday to finish a volatile week down 1.1% at 81.6850 on the back of huge corporate dollar demand.

The currency is expected to hold between 81.30 and 82 over a comparatively less turbulent week, traders said.

The minutes of the Federal Reserve’s latest meeting are due mid-week and will be key to the dollar index’s direction, which was tethered to a range last week.

Investors will parse through the minutes to gauge any change in tone after multiple central bank officials gave hawkish comments last week, firming expectations of a longer hiking cycle and a higher terminal rate.

“The rupee is likely to remain underpinned around the 82 mark,” said Sugandha Sachdeva, VP of commodity and currency research at Religare Broking.

A further drop in oil prices, already around $90 per barrel, and a resurgence of foreign investor inflows into Indian equities after a dip last week are two major factors that could be rupee positive, she added.

Meanwhile, Indian government bond yields are expected to trade in a narrow 7.25%-7.35% range, remaining pegged to global cues such as oil prices and U.S. yields due to the absence of any fresh domestic triggers.

“Locally there are no triggers and since the 7.25% level was not broken comfortably last week, we may not see it happening this week either,” a trader with a private bank said.

As the week progresses, the benchmark 10-year bond yield could again inch upwards and test 7.35% on Friday, coinciding with a fresh debt auction.

The benchmark bond yield ended at 7.3077% last Friday, flat week over week, after having dropped 16 bps the week before.


Minutes of U.S. Federal Reserve Nov. 1-2 meeting - Nov 24 (0030 IST) (Reporting by Anushka Trivedi in Mumbai; Editing by Savio D’Souza)