Rupee and bonds rebound on hopes Fed nearing end to hikes

economictimes.indiatimes.com:

bonds and the rupee have staged a smart recovery as concerns over how much higher US interest rates may head have been soothed by a lower-than-anticipated American jobs number and comments by Fed officials hinting at the end of tightening. Yield on the 10-year benchmark government bond has eased 7 basis points from its close of 7.16% on Friday, largely tracking a steep fall in US government borrowing costs. Bond prices and yields move inversely.

One basis point is 0.01 percentage point. A fall in sovereign bond yields makes it cheaper for companies to raise funds through debt issuances as the government's borrowing cost is the benchmark used to determine corporate cost of borrowing. Meanwhile, the rupee has strengthened 0.4% from its close of 82.74 per US dollar on Friday as Asian currencies have largely benefited from a weaker dollar globally following signals from the Fed.

The rupee, which had weakened almost 1% versus the dollar in the previous week, settled at 82.37 per dollar on Tuesday. «Dollar weakened amid a decline in US inflation expectations and on the back of lower US bond yields. The USD/CNH (yuan) pair cooled off from highs of 7.27 to around 7.20 which also assisted the rupee.

For USD/INR, the overall range play is to continue between 82.10-82.70 for some more time,» Kunal Sodhani, vice-president, Shinhan Bank said. On Monday, some US Fed officials, including San Francisco Fed President Mary Daly, hinted that while interest rates would likely be raised again, the Fed was nearing the end of its tightening cycle. The 10-year US bond yield fell as much as 14 basis points from its high on Monday following her comments.