By Anoop Agrawal Nov. 3 (Bloomberg) -- India's rupee rose by the most in a decade on speculation the central bank's surprise interest-rate cut at the weekend will support growth in Asia's third-largest economy. India's currency gained after the Reserve Bank of India on Nov. 1 cut its repurchase rate by half a percentage point to 7.5 percent and freed up funds by lowering the amount banks must set aside to cover deposits. Local stocks extended a rally. Central banks from the U.S. to Europe and Japan are seeking to avoid a global recession after more than $11 trillion was wiped off stock-market values worldwide last month. ``The measures are an appropriate response to the developing global situation and domestic growth considerations,'' said Sanjay Arya, a treasurer at state-owned Bank of Maharashtra. ``The rupee should increase the pace of its appreciation.'' The rupee climbed 1.7 percent to 48.645 a dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. That is the biggest advance since Jan. 19, 1998. The currency has recovered 3.3 percent from an all-time low of 50.29 touched on Oct. 27. It has dropped 19 percent this year against the dollar, the second-worst performer after the South Korean won among the 10 most-active Asian currencies outside Japan. Funds based abroad sold a record $13 billion more Indian assets than they bought. India's central bank on Oct. 24 reduced its forecast for growth to as slow as 7.5 percent from 8 percent in the year to March 31. Stocks, Forwards The rupee rose for a fourth day, the longest winning streak in more than three months, after the benchmark stock index extended gains, spurring speculation funds based abroad will reduce sales of Indian equities. The Bombay Stock Exchange Sensitive Index, or Sensex, climbed 5.6 percent, after adding 8.2 percent on Oct. 31. ``The equity markets are going to be more optimistic about growth prospects and positive sentiment will prevail,'' Bank of Maharashtra's Arya said. ``The extent of the gains in the rupee will be determined by that sentiment.'' Offshore forwards contracts show traders have pared bets for how much they predict the rupee will depreciate over the next 12 months, showing an implied rate of 52.13 a dollar compared with 57.11 at the start of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Indian forwards are non- deliverable, meaning they are settled in dollars rather than the local currency. To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

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