Rupee weakens against US dollar, bond prices fall on global cues

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Mumbai: The Indian rupee and bond prices fell on Monday, tracking losses in global equities and currencies markets after strong job data speculated that US Federal Reserve may boost interest rates next month. The next US Fed policy will start on 21 March.

At 9.15am, the rupee was trading at 64.19, down 0.19% from its previous close of 64.06. The home currency opened at 64.22 and touched a low of 64.23 a dollar.

The 10-year bond yield was at 7.62% from its previous close of 7.562%. Bond yields and prices move in opposite directions.

The benchmark Sensex index fell 1% or 347.90 points to 34,718.85. So far this year, Sensex has risen 3.5%.

On Friday, US Labor Department data showed non-farm payrolls rose 200,000 in January, exceeding the median estimate of economists for a 180,000 increase as the jobless rate held at a near 17-year low of 4.1%.

Domestically, the Reserve Bank of India’s (RBI) interest rate decision on 7 February will also be closely watched.

Analysts expect the RBI to keep interest rates on hold on expectations that inflation may accelerate further due to higher crude oil prices and proposed hike in minimum support prices for farmers and spur RBI to maintain a hawkish stance.

Of the 15 economists surveyed by Mint, 14 expect the central bank to keep repo rate—the rate at which the central bank infuses liquidity in the banking system—unchanged at 6%. Only one expects a rate hike of 25 basis points.

Indian markets are already under pressure after the government breached its fiscal deficit target for fiscal year 2017 to 3.5% from earlier target of 3.2% and revised upward its deficit target for next fiscal year to 3.3% from 3% earlier.

Also introduction of long-term capital gains tax dampened sentiments.

So far this year, the rupee has weakened 0.5%, while foreign investors bought $2.22 billion in equities and $1.67 billion in debt market.livemint