Rupee completes third weekly gain as investments rise

Rupee completes third weekly gain as investments rise

Mumbai: The rupee completed a third weekly advance on speculation US interest rates as low as zero will encourage global investors to buy higher-yielding assets.

The currency touched the highest in two-and-a-half months after the US Federal Reserve cut its benchmark interest rate to a record this week. Overseas investors bought more Indian shares than they sold since 1 December, heading for the first month of net purchases since April, data on average daily trading from the Securities and Exchange Board of India (Sebi) showed. Eight of the 10 most active Asian currencies outside Japan rose this week.

“I expect the rupee to strengthen from here as capital inflows are improving," said Puneet Sharma, chief currency trader at state-owned Allahabad Bank in Mumbai. The rupee has been reflecting the trend in stocks and may continue to do so.

The rupee strengthened 2.8% this week to 47.255 per dollar at the 5pm close in Mumbai, according to data compiled by Bloomberg. That’s the best performance since the five days ended 7 November. It may climb to 46.75 in coming days, Sharma said.

The currency has rebounded more than 7% from a record low of 50.615 reached on 2 December. The rupee’s 16.6% loss this year is the biggest since 1991.

Rising equities

Asian stocks rose this week after the Federal Reserve said on 16 December it will target a federal funds rate of between zero and 0.25%. The Reserve Bank of India’s benchmark lending rate is 6.5%.

The MSCI Asia Pacific Index of regional shares is up 8.6% in December, headed for its biggest monthly gain since June 1999. The last time the index ended a month higher was in April this year.

India’s benchmark share index, the Sensex, gained 4.2% this week, adding to last week’s 8.1% advance.

Funds based abroad bought Indian shares worth an average $35 million a day more than they sold this month, compared with net daily sales of $46 million and $186 million, respectively, in November and October, according to data released by Sebi.

Bob Chen in Hong Kong contributed to this story.