MUMBAI, Nov 28 (Reuters) - The Indian rupee and government bond yields are expected to continue to hold their narrow trading ranges this week, with investors bracing for a jump in volatility due to multiple economic data releases at home and in other major countries.
The rupee ended unchanged at 81.6850 per U.S. dollar last week. It was trapped in a narrow 81.44-81.9150 range despite a weaker greenback, due to huge cash dollar demand and the Reserve Bank of India's (RBI) presence amid equity inflows, traders said.
"Markets are sensing a softening of approach from the U.S. Federal Reserve and that's giving legs to risk assets. That's expected to be supportive for the rupee and unless something changes, we will still be in a tight range of 81-81.80", a trader with a private bank said.
The bias is towards the rupee appreciating, but dollar buying could once again limit gains, and the downside risk will come from surprises in economic data reports, the trader added.
Government bonds are also expected to move in a narrow range, with traders focussed on India's economic growth numbers due on Wednesday, a fixed income trader said.
Any weakness there will put pressure on the RBI to slow down rate hikes, they added.
The benchmark 10-year bond yield finished flat at 7.3012% last week. It is expected to stay within a 7.25%-7.33% band this week, with a break below 7.25% considered highly unlikely, the trader said.
Many Asian countries are scheduled to release manufacturing data, with China's factory activity data due Wednesday. U.S. consumer spending data as well as multiple jobs reports will also be in the limelight.
COVID cases in China have surged again, shortly after some curbs were relaxed, throwing further doubt on when the world's second-largest economy will reopen completely. The ensuing depreciation in the yuan has weighed on Asian currencies lately.
Reporting by Anushka Trivedi in Mumbai; Editing by Savio D'Souza
Source: Reuters