Mumbai: The rupee approached its strongest level in more than six weeks as foreigners stepped up purchases of the nation’s stocks, taking total holdings to the highest since December 2007.
The currency rose for the sixth time in seven days after exchange data showed global funds bought $1.4 billion (Rs6,734 crore) more local shares than they sold last week, the most in two years. India’s economic growth accelerated to 6.1% in the quarter ended 30 June, a pace of expansion that’s second only to China in Asia.
The Asian Development Bank raised on 22 September its 2009 growth forecast for the region, excluding Japan, to 3.9% from 3.4 %.
The rupee strengthened as investment inflows remain strong, said Vikas Babu, a foreign exchange trader in Mumbai at state-owned Andhra Bank. The rupee will continue to track the trend in equities.
The rupee climbed 0.1% to 47.97 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency has gained 1.8% this month.
Offshore contracts indicate bets the rupee will trade at 47.97 to the dollar in a month, compared with expectations of 48.02 on Wednesday.
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.
Funds based abroad have bought Indian equities worth a net $10.45 billion this year, boosting their holdings to $65.7 billion, according to the Securities and Exchange Board of India.
The Bombay Stock Exchange’s Sensitive Index, which added 0.4% on Thursday, has surged 77% in the past six months.
The rupee dropped earlier on speculation local importers increased purchases of foreign currency to settle month-end bills.
Refiners including Indian Oil Corp., the nation’s biggest, may have stepped up dollar buying to pay for crude oil imports. The commodity gained 53% in New York this year.