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Business News/ Money / Rupee advances on speculation recovery is attracting capital
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Rupee advances on speculation recovery is attracting capital

Rupee advances on speculation recovery is attracting capital

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Mumbai: The rupee advanced for a second week on speculation the nation’s economic recovery is attracting foreign capital to the stock market.

The currency reached a five-week high on Thursday after foreign funds raised holdings of local shares for the eighth day, the longest stretch since July, to the highest in at least 20 months.

The Bombay Stock Exchange’s benchmark sensitive index extended this year’s gains to 74% after Asia’s third largest economy expanded 6.1% last quarter, accelerating for the first time since 2007.

India’s capital account is expected to be the key driver for rupee gains in the coming months as portfolio inflows remain healthy, said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore. The rupee climbed 0.7% on Friday to 48.14 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency has strengthened 1.5% since 31 August, heading for the biggest monthly gain since May.

Offshore contracts indicate bets the rupee will trade at 48.21 to the dollar in a month, compared with expectations of 48.53 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.

Funds based abroad have bought Indian equities worth a net $9.2 billion (Rs44,344 crore today) this year, more than twice the amount a year earlier, raising outstanding investments to $64.5 billion, according to the Securities and Exchange Board of India.

That is the highest level since December 2007.

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Published: 18 Sep 2009, 10:20 PM IST
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