July 31 (Bloomberg) -- India’s rupee gained for a second day, paring a monthly loss, on speculation rising investments from abroad will boost the nation’s balance of payments surplus. The currency approached a three-week high after latest data showed foreign funds bought more Indian shares than they sold for a 13th straight day, the longest stretch in two years. The BOP account turned to a surplus of $300 million in the quarter to March from a record deficit of $17.9 billion in the previous three months. The central bank this week raised its forecast for economic growth, saying it may soon need to reverse its loose monetary policy of the past 10 months. “The rupee should gain as the improving balance of payments becomes the dominant driver,” said Nhan Ngoc Le, a Singapore-based strategist at Royal Bank of Scotland Group Plc, the U.K.’s biggest state-owned bank. “India’s balance of payments is expected to improve more sharply later this year.” The rupee climbed 0.4 percent to 48.1725 per dollar as of 9:57 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 48.095 on July 27, the strongest level since July 6. The rupee is still the worst performer this month among the 10 most- active currencies in Asia outside Japan, dropping 0.6 percent. Money managers based abroad have bought a net $7 billion of Indian equities this year, more than twice the amount in the same period in 2008. Offshore contracts indicate bets the rupee will trade at 48.30 to the dollar in a month, compared with expectations for a rate of 48.27 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. To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.

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