Mumbai: The rupee gained for the first time this week as signs of a global recovery boosted stocks, spurring optimism foreign investors will increase their holdings of the nation’s shares.
The currency trimmed Tuesday’s 1.3% loss as derivatives linked to a key local share index surged offshore after reports showed US consumer confidence jumped the most in six years and Japan’s export slump eased. Average daily purchases of Indian stocks by global funds more than doubled this month as risk aversion waned.
“With capital inflows looking good and Indian index futures rising overseas, the rupee has reversed Tuesday’s negative bias,” said Krishnamurthy Harihar, treasurer in Mumbai at the Indian unit of FirstRand Ltd, South Africa’s second largest financial services company. Government plans to sell stakes of state-owned companies will attract more money in the future.
The rupee strengthened 0.5% to 47.71 per dollar on Wednesday, according to data compiled by Bloomberg.
That took gains this month to 5%, the best performance among the 10 most traded Asian currencies.
Offshore contracts indicate bets that the rupee will trade at 47.86 to the dollar in a month, compared with expectations for a rate of 48.05 on Tuesday.
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.
Investors should buy the rupee against the Philippine peso, according to currency strategists at Bank of America Securities Merrill Lynch.
Prospects for the rupee have improved significantly following the ruling Congress party’s election victory this month, the strategists wrote in a research note dated Tuesday.