Mumbai: The rupee rose the most in almost two months on speculation that stock gains will help stem capital outflows triggered by turmoil in financial markets.
The rupee climbed from a near two-year low touched this week after the US government stepped up efforts to ease the credit market squeeze and central banks of the world’s biggest economies pumped $180 billion into money markets. The Bombay Stock Exchange’s benchmark Sensex index had its biggest gain in almost two months. Four of the 10 most-active Asian currencies excluding the yen rose against the dollar.
“The rupee fell victim to panic reaction, and now, like other assets, is recovering lost ground,” said Jayant Chiney, treasurer at state-owned Bank of India in Mumbai. “The rupee should be at levels much higher than at present.”
The rupee rose 1.4% to 45.83 a dollar at the 5pm close, according to data compiled by Bloomberg. The gain was the most since 23 July.
Rupee’s gains were tempered by speculation that importers including Indian Oil Corp. will purchase dollars to pay for crude oil as the commodity rebounded from a seven-month low. Crude oil for October delivery rose to $100.23 a barrel after dropping to $90.51 on 16 September.