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Rupee strengthens as stocks stage rally

Rupee strengthens as stocks stage rally
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First Published: Fri, Mar 13 2009. 10 56 PM IST

Currency rebounds: The rupee closed at 51.52 to the dollar on Friday,rebounding 1.3% from the record low of 52.19 it touched on 3 March.Indranil Mukherjee / AFP
Currency rebounds: The rupee closed at 51.52 to the dollar on Friday,rebounding 1.3% from the record low of 52.19 it touched on 3 March.Indranil Mukherjee / AFP
Updated: Fri, Mar 13 2009. 10 56 PM IST
Mumbai: The rupee strengthened on speculation global stock gains will encourage investors to increase purchases of emerging market assets.
The currency climbed as the Bombay Stock Exchange’s Sensex index rallied 5%, the most since 10 December, adding to Thursday’s 2.3% gain. The MSCI Asia-Pacific Index of regional shares rose 3.5% as the US S&P 500 Index headed for its biggest weekly advance since November.
Currency rebounds: The rupee closed at 51.52 to the dollar on Friday,rebounding 1.3% from the record low of 52.19 it touched on 3 March.Indranil Mukherjee / AFP
“Looks like conditions are turning more favourable for a rebound in the rupee from recent lows, with stock markets sustaining a positive trend,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai.
The rupee climbed 0.7% to 51.52 per dollar at close on Friday in Mumbai, according to Bloomberg data. It rose as high as 51.41 earlier.
The currency has rebounded 1.3% from a record low of 52.1850 touched on 3 March. It is still the fourth worst performer among the 10 most traded Asian currencies this year, with a 5.5% loss. The Sensex has dropped 9% so far this year as overseas funds sold $2.3 billion (Rs11,891 crore) more Indian equities than they bought.
Offshore contracts indicate traders bet the rupee will trade at 51.80 to the dollar in a month, compared with expectations of 52.16 on Thursday.
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 rupee pared gains on concern inflows of foreign direct investment will slow as a slump deepens in Asia’s third largest economy. India on Thursday reported its first back-to-back decline in industrial production in 16 years.
“The rupee continues to have a bias for weakening given the bleak economic outlook,” said K.V. Mallik, treasurer at state-owned UCO Bank in Kolkata.
Output at factories, utilities and mines fell 0.5% in January from a year earlier after a revised 0.6% drop in December, the Central Statistical Organization said in New Delhi on Thursday.
India’s $1.2 trillion economy expanded 5.3% last quarter from a year earlier, the slowest pace in five years, the government said on 27 February.
Overseas direct investment in India averaged $3.1 billion a month in 2008, compared with $1.3 billion in the previous year, government data show.
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First Published: Fri, Mar 13 2009. 10 56 PM IST