BLBG: Rupee Closes at Eight-Month High as Foreigners Add to Holdings
India’s rupee closed at an eight- month high as local share purchases by foreign funds in May exceeded sales by the most in 19 months.
The currency rose, following its best month on record, as a rally in equities and commodities added to optimism signs of a global economic recovery are encouraging investors to increase holdings of emerging-market assets. The rupee also advanced as a gauge that tracks the dollar against six major currencies slumped to a five-month low, indicating demand for the greenback weakened.
“There’s pressure on the rupee to appreciate as capital inflows keep rising,” said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. “The dollar is weakening broadly and the rally in stocks and commodities are underscoring the optimism” about a turn around.
The rupee strengthened 0.3 percent to 46.945 per dollar at the 5 p.m. close in Mumbai, the strongest since Oct. 1, according to data compiled by Bloomberg. It may rise to 46.50 this week, Babu said.
Offshore contracts indicate bets the rupee will trade at 47.01 to the dollar in a month, compared with expectations for a rate of 47.18 at the end of last week. 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.
Stock Inflows
Overseas funds bought a net $4.3 billion of Indian shares last month, the most since October 2007, according to data released by the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index gained 28 percent in May, the best month since 1992. The Reuters/Jefferies CRB Index of 19 raw materials gained 14 percent in May, the most since July 1974.
China’s manufacturing expanded for a third month, adding to evidence that demand for goods is recovering globally. The official Purchasing Manager’s Index was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the British pound, the Canadian dollar, Swiss franc and Sweden’s krona, dropped for a third day, sliding 0.7 percent today.
