Mumbai: Rupee strengthened to a 19-month high after overseas investors boosted their holdings of the nation’s stocks and bonds to record levels, seeking to profit from an expanding economy and rising interest rates.
The currency gained the most since October after foreign ownership of bonds and equities reached all-time highs of $12.2 billion (Rs54,534 crore) and $77.2 billion, respectively, on 30 March, according to data released by the Securities and Exchange Board of India.
The country’s economic growth is impressive and may accelerate to as high as 8.75% in the fiscal that began on 1 April, from an estimated 7.2% in the last 12 months, finance minister Pranab Mukherjee said on 2 April.
“The rupee has recently broken through key resistances and looks set to appreciate as capital inflows remain heavy,” said Vikas Babu, a Mumbai-based foreign-exchange trader at state-owned Andhra Bank. “Growth is strengthening and India is also ahead of most economies in the interest-rate cycle. Economic data is improving across the world, boosting risk appetite.”
The rupee climbed 1.1% to Rs44.4425 per dollar at close on the Bombay Stock Exchange, according to data compiled by Bloomberg.
The currency has appreciated 4.7% this year, Asia’s best performance after Malaysia’s ringgit. It touched 44.43 on Monday, the highest level since 8 September 2008. Foreign-exchange and debt markets were shut on 1 April and 2 April for holidays.
Offshore contracts indicate bets the rupee will trade at 44.51 to the dollar in a month, compared with expectations of 44.97 on 31 March.
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.
The Reserve Bank of India raised its benchmark interest rate by 0.25 percentage point to 3.5% on 19 March, the first such move since 2008. RBI will review interest rates again on 20 April.