BLBG:Rupee Rallies Most Since December on RBI Measures: Mumbai Mover
India’s rupee jumped the most in almost five months, spurring gains in stocks and bonds, after the central bank tightened rules on exporters’ earnings to boost dollar supply and stem Asia’s worst exchange-rate loss.
The currency rebounded from near the lowest level since December after the Reserve Bank of India cut the amount of overseas income companies can hold in foreign currency to 50 percent from 100 percent, forcing them to convert earnings. The rupee also gained on speculation the central bank intervened in the market to sell dollars.
Reserve Bank Governor Duvvuri Subbarao is stepping up efforts to support the currency after it lost 4.5 percent this quarter, fueled by Standard & Poor’s decision on April 25 to cut the outlook on the nation’s BBB- rating to negative. Funds based abroad cut holdings of Indian stocks and bonds by $781 million in the month through May 8 and the nation’s trade deficit rose to a record $184.9 billion in the fiscal year ended March 31, official figures show.
“The rupee’s rally today is completely because of this announcement,” said Paresh Nayar, head of money-market and currency trading in Mumbai at FirstRand Ltd. (FSR) “The rupee has to strengthen because of the RBI moves but we have to wait and see how it reacts in the coming days as we still have a trade deficit, which means demand for dollars will be strong.”
The rupee advanced 1.5 percent to 53.0300 per dollar as of 9:51 a.m. in Mumbai, in the biggest advance since Dec. 16, according to data compiled by Bloomberg. The currency’s one- month implied volatility, a measure of exchange-rate swings used to price options, rose 26 basis points, or 0.26 percentage point, to 11.46 percent.
Stocks, Bonds
The BSE India Sensitive Index of shares, or Sensex (SENSEX), gained 0.8 percent to 16,610.56 in Mumbai. State Bank of India, the nation’s biggest lender, paced advances among its peers. Larsen & Toubro Ltd., the largest engineering company, and DLF Ltd., the biggest developer, rose more than 2 percent each.
In the government bond market, the yield on the benchmark 8.79 percent notes due November 2021 dropped two basis points, or 0.02 percentage point, to 8.55 percent in Mumbai, according to the central bank’s trading system.
“We’re pretty much at the bottom in terms of the rupee and most of the bad news is in the price,” Hans Goetti, Singapore- based chief investment officer for Asia at Finaport Investment Intelligence, which has $1.5 billion in assets under management, told Bloomberg UTV today. “We don’t see much of a downside risk for Indian markets from here.”
Six-month onshore currency forwards were trading at 54.82 a dollar, compared with 55.56 yesterday, and offshore non- deliverable contracts were at 54.97 from 55.73. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.
To contact the reporters on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net; Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
