Swati Bhagat

MUMBAI (Reuters – On Friday the Indian rupee experienced its worst week in seven. The benchmark 10-year yield was at its lowest point in two weeks. Markets around the world were shaken by concerns regarding a COVID derivative.

After the discovery of the mutation, investors fled from riskier assets and currencies fell in Asia’s emerging market economies. This in turn strengthened safer-haven assets like the dollar.

Partially convertible rupees closed at 74.987 USD, down from 74.51 on the close. It had fallen to 74.9250 an hour earlier, which is its lowest point since November 1. The unit lost 0.9% on the week. This is its largest weekly drop since Oct. 8th, when it had gained five consecutive weeks.

Ending at 6.33% on the benchmark 10-year bond yield, it was its lowest closing price since Nov. 9, and fell 4 basis points per day.

This is due to the current variant of bonds. According to Murthy Nagarajan (head of Fixed Income at Tata Asset Management), the market expects that the RBI will be more cautious due to uncertainty.

People are toying with the notion that the reverse repo may be lowered by some people.

In response to concerns that this new variant might cause even more economic destruction, Indian shares plunged nearly 3% ()

After a three day meeting, the Reserve Bank of India will announce the decision of its Monetary Policy Committee. A large portion of the market had been anticipating them to raise the reserve repo to normalize the policy rate corridor back to pre-pandemic levels.

While the central bank is already conducting temporary reverse repo auctions at variable rates with slightly longer tenors in order to absorb large liquidity surpluses, the bank has so far resisted the urge to announce any further permanent measures.

The 10-year yield on the bond will trade between 6.25% and 6.40% until policy is made. The rupee should largely follow domestic shares as well as dollar movements for direction. Over the next 2 weeks, it is widely expected that the rupee will trade between 74.25 and 75 dollars.

Global price movements will be closely watched as they can have a significant impact on India’s import bill. India imports over three-quarters of its oil requirement.

As the supply surplus was expected to grow in the first quarter, oil prices dropped more than 5%.