The 10-year bonds climbed for a second day before Government inflation report.
The Indian rupee continued its ascent against the US dollar on Thursday, tracking gains in other Asian currencies after the Federal Reserve said it will expand its financial rescue efforts by buying long-term debt and mortgage-backed securities. The partially-convertible currency also rose as the stock market continued to gain on the back of a rally in the US market overnight.
At 11:26 am, the rupee was quoting at 50.79 versus the dollar after touching a day's high of 50.65 and a low of 51.11. It opened at 51.06 against the previous close of 51.28/29. The intra-day high struck today is the rupee's best level since Feb. 27. The local currency has rebounded 2.5% against the greenback since reaching a record low of 52.19 on March 3.
The BSE Sensex in Mumbai rose as much as 1.2% today to 9,086 before coming off the day's peak on some profit booking. It was last trading at 9,002, up 25 points from the previous close. The FIIs pumped in US$110mn into Indian equities on March 17, the most in more than three months, according to the latest data from the capital market regulator SEBI. They have still net sold Indian shares at US$400mn this month, and US$2bn year-to-date.
Offshore contracts indicate traders bet the rupee will trade at 51.25 per dollar in a month, compared with expectations 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.
Asian currencies rose today, led by South Korea’s won and the Taiwan dollar, on speculation that US$1 trillion of bond purchases planned by the US Federal Reserve will ease a global recession and revive demand for emerging-market assets.
The won and the Taiwan dollar both strengthened to five- week highs and the MSCI Asia Pacific Index of regional stocks climbed for a fifth day, its longest winning streak since January 5. The Fed yesterday announced plans to buy company and government bonds to keep borrowing costs down and revive lending.
On Wednesday, the dollar extended its recent slide against major rival currencies after the Fed said it will enhance its financial rescue efforts by buying about US$1 trillion in government bonds and mortgage-backed securities to revive lending.
Separately, India's 10-year bonds climbed today for a second day before a government report today that economists say will show that the inflation rate dropped to the lowest since at least 1990. India's inflation, as measured by the wholesale price index (WPI), is estimated to slump below 1% for the week ended March 7 as against 2.43% in the previous week.
Benchmark notes also rallied as the Reserve Bank of India prepared to purchase Rs100bn of existing debt from investors in an effort to cap yields.
The yield on the 6.05% bond maturing in February 2019 dropped 14 basis points to 6.3% as of 9:13 a.m. in Mumbai, according to the central bank’s trading system. The price rose 98 paise per 100-rupee face value, to Rs98.15.
