RTRS: India Rupee Gains Most in 4 Months as Fed Plan Helps Draw Funds
India’s rupee strengthened the most in four months on speculation the U.S. Federal Reserve’s plan to buy $1 trillion of bonds will drive interest rates lower, boosting demand for higher-yielding assets.
The currency climbed to a three-week high versus the dollar as the Bombay Stock Exchange’s Sensitive Index closed above 9,000 for the first time in a month. Overseas investors bought Indian shares worth $110 million more than they sold on March 17, the most in more than three months, according to the latest data from the Securities and Exchange Board of India.
“The rupee’s bias is clearly upward,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Markets are rallying globally, showing the Fed’s bond purchase announcement has boosted investor confidence.”
The rupee rose 1.8 percent to 50.3825 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. That is the strongest since Feb. 25 and the biggest gain since Nov. 4. The currency has rebounded 3.6 percent since reaching a record low of 52.1850 on March 3.
The MSCI Asia-Pacific Index of regional shares advanced 2.2 percent after the U.S. Standard & Poor’s 500 Index added 2.1 percent. The Sensitive Index, or Sensex, rose 0.3 percent.
Offshore contracts indicate traders are betting the rupee will reach 50.79 per dollar in a month, compared with expectations for a rate of 51.67 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Economic Stimulus
The rupee also gained on optimism economic stimulus measures unveiled by the government and the central bank in recent months will help revive growth. The government has announced additional spending while the Reserve Bank of India has cut interest rates five times since September.
The stimulus packages have begun showing an impact, Cabinet Secretary K.M. Chandrasekhar said in New Delhi today. Demand in the cement, auto, steel and infrastructure industries has been “picking up,” he said.
