Mumbai: The rupee jumped the most in 14 months as policymakers in Europe pledged almost $1 trillion (Rs45 trillion) in loans to ease a debt crisis, encouraging investors to return to emerging market assets.
The rupee rose for the first time in six days as stocks and currencies rallied across Asia. Investors should buy the rupee against the dollar and the euro using non-deliverable forward contracts that mature in three months to gain from India’s improving economy, foreign-exchange strategists at Standard Chartered Plc wrote in a research note on Monday. “India’s economic growth is second only to China’s in Asia and should continue to attract capital inflows,” wrote Priyanka Chakravarty and Thomas Harr at Standard Chartered based in Mumbai and Singapore, respectively. “The rupee is likely to benefit from the European Union’s emergency fund.”
The currency strengthened 1.4% to 44.86 per dollar at close in Mumbai, according to Bloomberg data. That is the biggest gain since 19 March 2009. It rose as high as 44.825 earlier. The rupee also appreciated 0.3% against the euro to 58.138.
Offshore forwards signalled traders pared bets for the rupee’s weakness. The contracts signal the currency will trade at 45.06 to the dollar in three months, compared with expectations of 45.78 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.
The MSCI Asia-Pacific Index of regional shares climbed 1.4%, and the Bombay Stock Exchange’s Sensex advanced 3.4%. Asia’s third-largest economy will grow at least 8% in the fiscal that started 1 April following a 7.2% expansion in the previous 12 months, the Reserve Bank of India predicted on 20 April.