Indian rupee, bonds to get a boost from Iran peace deal, eye Fed move
The Indian rupee and bonds are set for gains this week, buoyed by a US-Iran peace deal and oil price movements, with investors also watching the US Federal Reserve's policy decision.
- US-Iran peace deal's impact on risk assets and oil prices.
- Indian rupee's expected climb against the US dollar.
- US Federal Reserve's policy decision and interest rate clues.
- India's 10-year bond yield and foreign investor activity.
MUMBAI: The Indian rupee and bonds are set to get a lift this week, supported by a US–Iran peace deal, while oil price swings are expected to guide the currency’s direction.
Investors are also awaiting the U.S. Federal Reserve’s first policy decision under Chair Kevin Warsh.
The Indian rupee heads into the new week with positive momentum after snapping a three-week winning streak and slipping marginally last week.
US President Donald Trump and Iran’s deputy foreign minister said they have agreed to halt the war and reopen the Strait of Hormuz, lifting risk assets and sending oil prices sharply lower.
The currency is expected to climb well past 95 per US dollar at open on Monday, having settled at 95.11 on Friday.
The currency was buffeted last week by persistent dollar demand from oil companies and other importers, though likely intervention by the central bank and mounting expectations of a U.S.-Iran peace deal helped cushion the downside.
Further, attention will be on the Federal Reserve’s policy decision, where the central bank is widely expected to keep interest rates unchanged.
The focus will be on Chair Kevin Warsh’s remarks and updated projections for clues on interest rates.
Bonds
The yield on India’s 10-year benchmark bond ended at 6.8957% on Friday, down 7 basis points for the week, posting its third consecutive weekly decline.
Bonds rose as oil prices slumped, and after the central bank released detailed guidelines outlining the hedging benefits it will provide to lenders for raising non-resident deposits and to state-run firms for raising overseas funding.
Traders expect the 10-year bond yield to move within a 6.85%-6.95% range this week, with the focus on oil price movements and Fed guidance.
Focus will be on foreign investor activity, as these investors have stepped up their bond purchases following the central bank’s policy decision and measures aimed at attracting dollar inflows.
Overseas investors net bought bonds worth 155.5 billion rupees in the last six sessions starting June 5, overtaking 155 billion rupees for the year until June 4.
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