(Corrects survey results in paragraph two.) India’s rupee strengthened a second day on speculation the central bank will boost interest rates tomorrow to cool inflation, increasing the nation’s yield advantage over the U.S., Europe and Japan. The Reserve Bank of India will increase its repurchase rate by a quarter of a percentage point to 7.5 percent, according to 18 of 20 economists surveyed by Bloomberg, with two predicting no change. Global funds boosted holdings of rupee debt by $227 million on June 13, the most in a month, according to exchange data. Prices may continue “facing upward pressure,” the central bank said in a report yesterday. The rupee “may rise further ahead of tomorrow’s RBI rate decision,” strategists at Credit Agricole SA led by Hong Kong- based Mitul Kotecha wrote in a research note released today. “Following hawkish comments from the central bank that inflation is likely to continue facing upward pressure, markets may begin to speculate that the RBI could hike by 50 basis points tomorrow.” The rupee appreciated 0.1 percent to 44.71 per dollar as of 9:28 a.m. in Mumbai, according to data compiled by Bloomberg. That pared its loss this quarter to 0.3 percent, the worst performance after the Thai baht among Asia’s 10 most-traded currencies. The nation’s 10-year government bonds due April 2021 yielded 8.37 percent, the most among Asia’s investment-grade debt and more than twice the 3.08 percent on similar-dated U.S. Treasuries, according to data compiled by Bloomberg. The rate rose three basis points, or 0.03 percentage point, from yesterday. Offshore forwards indicate the rupee will trade at 45.35 to the dollar in three months, compared with expectations of 45.40 yesterday. 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: Anil Varma in Mumbai at avarma3@bloomberg.net. To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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