WSJ: India Rupee Near 3-Week High On Euro, Stocks; Bonds Recover As Food Inflation Eases
MUMBAI (Dow Jones)--The Indian rupee rose to a near three-week high against the U.S. dollar Thursday, tracking the euro's rise against the greenback and gains in local stocks.
The dollar was at INR44.70 late Thursday, compared with INR44.86 late Wednesday. The pair touched an intraday low of INR44.66, a level last seen on June 10.
"It seems at least for some time the Greek debt situation is likely to improve, which will attract inflows to riskier currencies in the emerging economies. The Indian rupee is also on the radar," said S. Sundar, head of treasury at the City Union Bank.
Riskier currencies took their cues from the euro, which rose to a three-week high In Asian trade Thursday after the Greek parliament's passage Wednesday of new austerity measures appeared to make a near-term default unlikely.
The Bombay Stock Exchange's Sensitive Index rose 0.8%, to close at 18,845.87.
Sundar said the rupee may strengthen further and the pair may reach 44.50 levels in the near-term.
Meanwhile, Indian government bonds recovered from early session weakness Thursday, helped by easing weekly food prices, which allayed some inflationary concerns.
The benchmark 7.80% 2021 bond ended at INR96.51, compared with INR96.56 at Wednesday's close. The bond touched an intraday low of INR96.33.
The second-most traded 8.08% 2022 bond ended at INR97.58, compared with INR97.70 at the previous close.
India's wholesale price index for food articles rose 7.78% during the week ended June 18 from a year earlier, sharply slower than the 9.13% rise in the previous week.
"The food prices easing provided some temporary relief in today's sessions, but going ahead the impact of the diesel price hike will stoke inflation," said Sundar of City Union Bank.
He added that the 7.80% 2021 bond yield may trade in a 7.25%-7.40% band in the next month. The bond yield ended at 7.33% Thursday.
A large debt supply during the week is also unlikely to support an upside in bond prices, dealers said.
The Reserve Bank of India sold INR60 billion of 35-day cash management bills Tuesday, INR90 billion of treasury bills Wednesday and will sell INR150 billion of bonds Friday.
-By Sourav Mishra, Dow Jones Newswires; +91-22-6145 6112; sourav.mishra@dowjones.com
