Mumbai: The rupee rose to the strongest level in four weeks against the dollar on speculation overseas investors will add to holdings of stocks as the region leads the world out of recession. Bonds gained for a second day.
India’s currency and the MSCI Asia-Pacific Index of regional shares both gained the most in a week after Japan reported its economy expanded at the fastest pace in more than two years. Industrial production in India increased 9.1% in September, beating analysts’ estimates for a 7% growth, a government report showed on 12 November.
The optimism across Asian stock markets is influencing the rupee as economic data continues to be encouraging, said Roy Paul, assistant manager of treasury at Federal Bank Ltd in Mumbai.
The rupee climbed 0.2% to 46.225 per dollar, according to data compiled by Bloomberg. It reached 46.115 earlier, the highest level since 20 October, and has strengthened 4.1% this quarter, the best performance among Asian currencies.
Offshore contracts indicate bets the rupee will trade at 46.19 to the dollar in a month, compared with expectations of 46.32 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.
Overseas investors have bought Indian shares worth $15 billion (Rs69,150) crore more than they sold so far this year, more than triple the amount from a year ago, according to data released by the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index gained 1.1% on Monday, the most since 11 November.
The Reserve Bank of India forecasts the $1.2 trillion economy to grow 6% or more in the financial year ending 31 March. That will be the second-fastest pace of expansion among major economies after China.
Bonds gained for a second day after the government sold debt maturing in 2016 and 2019 at lower yields than traders estimated on 13 November, signalling stronger-than-expected demand for fixed-income securities.
India sold seven-year and 10-year notes at 7.36% and 7.34% at an auction in Mumbai, according to the central bank.
Friday’s auction result gave out positive signals as far as demand for bonds is concerned, said Roy Paul, assistant manager of treasury at Federal Bank Ltd in Mumbai. That has triggered a bit of a rally.
The yield on the 6.9% note due July 2019 dropped one basis point, or 0.01 percentage point, to 7.31%, according to the central bank’s trading system. That’s the lowest level in more than a week.
The price rose 0.08, or 8 paise per Rs100 face amount, to 97.18. The rate on the benchmark bond has climbed 2.06 percentage points this year.