Inflow cushion to anchor Indian rupee against month-end flows; bonds track oil, Treasuries

Business Recorder reported that the Indian rupee is expected to stay within a narrow band this week, as strong capital inflows help limit volatility. The currency finished Friday at 95.6950, shedding about 0.3% across the week, as the Reserve Bank of India kept intervening to prevent steeper losses. Across the weekend, the central bank stated that inflows under June measures reached close to $73 billion, lifting foreign exchange reserves near their record high.

Bankers and analysts say the inflows have strengthened the central bank's capacity to support the currency. According to a note from IFA Global, traders want to buy dollars but are wary of RBI action near 95.80, leaving interbank activity muted. Month-end settlements on derivatives and corporate payments could also press the rupee, while oil stays elevated due to the Iran war.

Government bonds should stay within a narrow range after the benchmark yield posted its sharpest weekly rise this financial year, crossing 6.85%. The 10-year bond yield closed Friday at 6.8495%, up 9 basis points and its largest rise since the period ending April 3. Traders expect it to trade between 6.80% and 6.89%, while minutes from the latest RBI meeting show a willingness to raise rates if inflation risks spread. Brent crude gained close to 7% last week, reaching around $94 per barrel and adding to concerns over India's inflation outlook.