BLBG:Rupee Rises Most Since January On Government Steps: Mumbai Mover
India’s rupee rose by the most in almost five months on speculation the government will announce measures today to halt the currency’s 20 percent slide in the past year.
The rupee rebounded from a record low touched on June 22 as a government official said today that India may allow foreigners to buy more of its debt and ease curbs on purchasing infrastructure bonds. The official asked not to be identified because the details are not yet public. Moody’s Investors Service maintained its stable outlook on the nation’s Baa3 credit rating today.
“The measures are imminent as the rupee’s drop had been too sharp and too quick,” said Sudarshan Bhatt, chief of foreign-exchange trading at Corporation Bank in Mumbai. “The rupee should draw significant support from the measures and may reverse its slide.”
The rupee advanced 1.1 percent to 56.515 per dollar as of 10:21 a.m. in Mumbai, according to data compiled by Bloomberg. That is the biggest gain since Jan. 27. The rupee may strengthen to 56.25 this week, Bhatt forecast. The currency has lost almost 6 percent this year, the worst performance among Asia’s 10 most- traded currencies.
Finance Minister Pranab Mukherjee said June 23 that measures will be announced today to halt the rupee’s slide, which threatens to stoke inflation and boost the cost to companies of repaying foreign debt.
Twin Deficits
Funds based abroad have sold an average $113.3 million more local equities a day than they bought this month, compared with net sales of $112.5 million in May and $203 million in April, exchange data show. Asia’s third-largest economy expanded 5.3 percent in the first quarter from a year earlier, the slowest pace in nine years, official data show. Wholesale prices rose 7.55 percent in May from a year earlier, after gaining 7.23 percent in April, according to government reports.
Slowing economic growth and widening budget and current- account deficits are encouraging overseas funds to sell more Indian assets. Fitch Ratings lowered India’s credit outlook to negative earlier this month, joining Standard & Poor’s in saying the nation is at risk of losing its investment-grade status.
“The rupee’s fortunes depend on the ability to address issues relating to growth, inflation and twin deficits,” said J. Moses Harding, executive vice-president at IndusInd Bank Ltd. in Mumbai. “It is important to prevent the worst and engineer a sharp unwind of the recent fall.”
Three-month offshore non-deliverable forwards traded at 57.60 a dollar, compared with 58.34 on June 22. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
