Mumbai: The rupee strengthened for a second day as Asian stock gains added to optimism the region’s economic recovery is attracting foreign investors.
The currency has rebounded from a seven-week low against the dollar after the government said this week growth in Asia’s third largest economy quickened in the quarter to June. The rupee also gained on speculation some exporters converted overseas earnings into the local currency. The MSCI Asia-Pacific Index of regional shares rose 0.3%, after slumping 1.4% on Wednesday.
“The rupee has benefited from the positive trend across Asian equities, which is reflecting some optimism about an economic recovery,” said Vikas Babu, a foreign exchange trader in Mumbai at state-owned Andhra Bank. “Also, exporters’ dollar sales are set to continue.”
The rupee advanced 0.1% to 48.915 per dollar at close in Mumbai, according to data compiled by Bloomberg. It is the worst performer among Asian currencies this quarter, with a 2.1% decline.
Offshore contracts indicate bets the rupee will trade at 49.03 to the dollar in a month, compared with expectations of 49.10 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.
India’s $1.2 trillion economy expanded 6.1% in the three months to 30 June from a year earlier, compared with 5.8% growth in the previous quarter, the government said on 31 August. Overseas investors bought shares worth a net $8.1 billion so far this year, more than twice the amount a year earlier, according to Securities and Exchange Board of India.
The economy may expand as much as 6.5% in the year ending 31 March, and growth may accelerate from 7-8% in the following 12 months, C. Rangarajan, chairman of the Prime Minister’s economic advisory council told CNBC-TV18 news channel on Thursday.
China’s manufacturing expanded at the fastest pace in 16 months in August. The official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said on 1 September. South Korea upgraded its estimate for second quarter growth on Thursday to 2.6% from 2.3% first reported in July