Mumbai: The rupee rose for a fourth day, its best run in a month, as sales growth at local auto makers buoyed the nation’s stocks and spurred optimism foreigners will add to their holdings.
The currency reversed an earlier loss as the Bombay Stock Exchange sensitive index, or Sensex, climbed 1.1% after Maruti Suzuki India Ltd, maker of half the cars sold in the country, said June sales climbed 23%, adding to signs demand is picking up in Asia’s third biggest economy. The rupee also gained on speculation some exporters bought the currency, betting it will extend its advance.
Investors are more optimistic about the markets and global economy than they were some months ago, said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. That is preventing losses in local assets.
The rupee strengthened to 47.90 per dollar at the close in Mumbai from 47.905 on Tuesday, according to data compiled by Bloomberg.
Overseas investors bought more Indian shares than they sold for the past three days, ending nine consecutive days of net sales, according to data provided by the Securities and Exchange Board of India.
Hero Honda Motors Ltd, the nation’s biggest maker of two wheelers, said its sales jumped 24% last month. Maruti’s sales performance in June was the second best in more than a year, Bloomberg data show.
Offshore forwards contracts indicate traders predict the rupee will decline to 47.97 in a month, unchanged from Tuesday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are used for currencies that aren’t freely convertible and are settled in dollars.
The rupee, Asia’s third best performing currency in the past quarter, will gain a record 11% by 30 September on rising foreign investment and a stronger current account, Royal Bank of Scotland Group Plc said.
India’s current account swung into surplus in the three months ended 31 March for the first time in two years, a central bank report showed on Tuesday.
The latest balance of payments data is positive for the rupee in that funding requirements and availability have realigned, Sanjay Mathur, a Singapore-based analyst at RBS, wrote in a research note on Wednesday. Any future deterioration in the current account should be offset by an improvement in portfolio capital flows. RBS forecasts the rupee will strengthen to 43 per dollar by the end of this quarter.