MUMBAI, July 3 (Reuters) -
A slew of U.S. economic data through the week will be key to moves in the Indian rupee, which has remained locked in the 82-to-the-dollar range, while bond yields could maintain their upward move.
The rupee traded in a narrow 81.93-82.06 range last week amid a rise in the dollar index, weakness in the Chinese yuan and equity portfolio inflows, and ended at 82.0375 on Friday.
Intraday traders will be hoping for more volatility this week amid the release of important U.S. data, traders said.
U.S. June ISM manufacturing and services data, May factory orders data, the U.S. jobs report and weekly initial claims data are all due through the week.
This set of data follows better-than-expected growth data for January-March, which has prompted investors to price in another Federal Reserve rate hike in July.
"Given that the July rate hike probability is now pegged high, only a large deviation in the upcoming U.S. data will lead to rupee breaking out of the range," Srinivas Puni, managing director at QuantArt Market Solutions, said.
Meanwhile, the benchmark India bond yield ended at 7.1166% on Friday, having risen six basis points (bps) in biggest single session rise since November 3. The yield rose four bps last week.
Even as the yield posted its biggest quarterly fall in three years, it moved higher by 13 bps for June, indicating a reversal of bullish bets.
Traders expect the benchmark yield to move in the 7.07%-7.15% range this week.
Bond yields jumped on Friday, as U.S. yields rose above key levels, while weaker-than-expected demand at debt auction further led to selloff on the last day of the quarter.
Yields will continue to rise in the next quarter due to a strong line-up of debt supply and as chances of a rate cut before the first half of next year look unlikely, traders told Reuters.
The Reserve Bank of India (RBI) has signalled monetary conditions will remain tight for some time as it looks to attain its 4% inflation target.
"I do not expect rate cuts from the RBI in the current calendar year, so rates are expected to remain higher for longer and yield curve is expected to steepen," said Arun Srinivasan, head of fixed income at ICICI Prudential Life Insurance. KEY EVENTS: • India June S&P Global Mfg PMI - July 3 (10:30 a.m. IST) • U.S. June S&P Global Mfg PMI - July 3 (7:15 p.m. IST) • U.S. June ISM Mfg PMI - July 3 (7:30 p.m. IST) • India June S&P Global Services PMI - July 5 (10:30 a.m. IST)
• U.S. May international trade data - July 6 (6:00 p.m. IST) • U.S. week to June 26 - initial jobless claim - July 6 (6:00 p.m. IST) • U.S. June non-farm payroll and unemployment rate - July 7 (6:00 p.m IST) (Reporting by Nimesh Vora and Dharamraj Dhutia; Editing by Varun H K)