Indian Bonds, Rupee Rally as Diesel Price Hiked by 5 Rupees

Indian rupee rallied to its highest 2 month, hitting 55.89 per dollar, while bond yields dropped after the government’s sharp hike in diesel prices raised by Rs 5 per litre. The government’s decision on this move is to help bring down its fiscal deficit and reduce the government’s fuel subsidy burden.

Analysts expect hike in diesel price raised hopes on cutting interest rates by Reserve bank of India (RBI) in next week.

But the benchmark 10-year bond yield fell as much as 7 basis points to 8.10%, the lowest level since July 26.