Rupee, 10-year yield may slide somewhat: Barclays

The rupee has settled down in a range post the Federal Reserve's September decision to not hike rates and the China meltdown. Going forward, Vijay Santhanam, MD - Head of Risk Solutions Group, Barclays, says he expects the currency to continue to stay ranged probably with a depreciating bias. "The Fed lift-off and China macros will continue to be in focus," he told CNBC-TV18.

On the 10-year yield, he said he does not see it falling too much after the recent 20 basis point retracement to 7.55 percent levels. "The grind lower would be slower considering that the Reserve Bank is expected to hold off on further rate cuts," he said.Below is the verbatim transcript of Vijay Santhanam's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Ekta: On the dollar index, what you are assuming in terms of weakness or further weakness for the dollar index and hence strength for the rupee?A: On the dollar/rupee right now post the Federal Reserve decision in September and the entire China equity meltdown, the rupee has settled down into a range now with other EM currencies, there was currently about a weakness but after the last few days, it is now trading in the range of 64.50 per USD to 65.50 per USD, today right now it is probably trading at 64.85 per USD.Going forward, we would have to look at global cues predominantly the messaging from the US Federal Reserve on the rates lift off and we need to keep an eye on the macro levels at China and the news coming out from China. So, at this stage, we would say rupee would be rangebound with a tendency to depreciate.Anuj: We have seen quite a bit of rally in bonds ever since that surprise 50 bps rate cut. With Reserve Bank of India (RBI) having kept the door opened for some more rate cuts, do you think yields could head even lower from here?A: Post the larger than expected rate cut, the yields have come down by approximately 20 bps on the 10-year benchmark. From here, one needs to keep in mind that there are international situations that we need to look out for but from an RBI perspective given the larger than expected rate cut that we saw, we probably expect them to hold for a while and see how the macro scenario plays out.Ekta: Leave us with some targets. By December of 2015 year-end, where do you see the yield as well as the rupee?A: I won't put a direct number to it but as I mentioned, on yields, on 10-year we can expect yields to move lower. One needs to watch out also for certain domestic factors in terms of what happens in the local elections here on November 8, that is a period when we can expect some volatility but yes gradually lower yields on dollar/rupee again rangebound at this stage with an eye on what plays out internationally but with a bias to depreciate.