Rupee Strengthens as Regional Growth Draws Investors to India
Thursday, April 15, 2010
2010 Bloomberg News
April 15 (Bloomberg) -- India's rupee strengthened, snapping a two-day loss, on speculation global investors will pump more money into Asian assets as economic growth picks up in the region.
The currency touched a 19-month high after China said its gross domestic product rose 11.9 percent in the last quarter, the biggest gain in almost three years. India's Finance Minister Pranab Mukherjee on April 2 forecast growth of as much as 8.75 percent for the fiscal year that started April 1, following an estimated expansion of 7.2 percent in the last 12 months. Speculation the central bank will next week raise interest rates for the second time this year also supported the rupee.
"The rupee is drawing strength from increasing equity- market inflows as the economic outlook improves," said Roy Paul, a Mumbai-based deputy general manager at Federal Bank Ltd. "Also, there are expectations that the central bank will raise rates at next week's policy meeting. That too will attract funds."
The rupee appreciated 0.1 percent to 44.4425 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency earlier touched 44.165, the strongest level since September 2008. It may trade between 44.00 and 44.50 in the coming days, Paul predicted. India's financial markets were closed yesterday for a holiday.
Offshore contracts indicate bets the rupee will trade at 44.48 to the dollar in a month, compared with expectations of 44.54 on April 13. 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.
Stock, Bond Inflows
The Bombay Stock Exchange's Sensitive Index rose 56 percent in the past year. The gauge lost 1 percent today. Overseas investors increased holdings of local shares to a record $78 billion in the past week and debt to $12.3 billion, also an all- time high, according to the Securities and Exchange Board of India.
The Reserve Bank of India raised its reverse-repurchase rate by 0.25 percentage point to 3.5 percent on March 19, the first increase of a benchmark rate since 2008. The monetary authority will next review borrowing costs at a quarterly meeting on April 20.
The rupee pared gains on speculation the central bank will seek to slow gains that erode exporters' earnings. India prefers intervention by regulators in the currency market to temper the rupee's gains, chief economic adviser in the Ministry of Finance Kaushik Basu said in Mumbai on April 13.
Competitiveness
India must stem rupee appreciation to protect exports as a recovery in shipments is "still nascent," the Confederation of Indian Industry said yesterday.
The currency gained 11.7 percent in the past year against the dollar, according to data compiled by Bloomberg. India's exports rose for a fourth consecutive month in February after dipping in the previous 10 months as a global recession reduced demand for its products. The rupee rose 5 percent against the Japanese yen and 9.6 percent versus the euro in the same period.
"This has hurt the competitiveness of Indian exports and further appreciation should be prevented," CII's Director General Chandrajit Banerjee said in an e-mailed statement. "The Reserve Bank of India should intervene in the currency markets."
One-month implied volatility, a measure of expectations for rupee price movements, was unchanged at 7.8 percent today, data compiled by Bloomberg show. The gauge of expected currency swings is quoted by traders as part of option prices.
Thursday, April 15, 2010
2010 Bloomberg NewsApril 15 (Bloomberg) -- India's rupee strengthened, snapping a two-day loss, on speculation global investors will pump more money into Asian assets as economic growth picks up in the region.
The currency touched a 19-month high after China said its gross domestic product rose 11.9 percent in the last quarter, the biggest gain in almost three years. India's Finance Minister Pranab Mukherjee on April 2 forecast growth of as much as 8.75 percent for the fiscal year that started April 1, following an estimated expansion of 7.2 percent in the last 12 months. Speculation the central bank will next week raise interest rates for the second time this year also supported the rupee.
"The rupee is drawing strength from increasing equity- market inflows as the economic outlook improves," said Roy Paul, a Mumbai-based deputy general manager at Federal Bank Ltd. "Also, there are expectations that the central bank will raise rates at next week's policy meeting. That too will attract funds."
The rupee appreciated 0.1 percent to 44.4425 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency earlier touched 44.165, the strongest level since September 2008. It may trade between 44.00 and 44.50 in the coming days, Paul predicted. India's financial markets were closed yesterday for a holiday.
Offshore contracts indicate bets the rupee will trade at 44.48 to the dollar in a month, compared with expectations of 44.54 on April 13. 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.
Stock, Bond Inflows
The Bombay Stock Exchange's Sensitive Index rose 56 percent in the past year. The gauge lost 1 percent today. Overseas investors increased holdings of local shares to a record $78 billion in the past week and debt to $12.3 billion, also an all- time high, according to the Securities and Exchange Board of India.
The Reserve Bank of India raised its reverse-repurchase rate by 0.25 percentage point to 3.5 percent on March 19, the first increase of a benchmark rate since 2008. The monetary authority will next review borrowing costs at a quarterly meeting on April 20.
The rupee pared gains on speculation the central bank will seek to slow gains that erode exporters' earnings. India prefers intervention by regulators in the currency market to temper the rupee's gains, chief economic adviser in the Ministry of Finance Kaushik Basu said in Mumbai on April 13.
Competitiveness
India must stem rupee appreciation to protect exports as a recovery in shipments is "still nascent," the Confederation of Indian Industry said yesterday.
The currency gained 11.7 percent in the past year against the dollar, according to data compiled by Bloomberg. India's exports rose for a fourth consecutive month in February after dipping in the previous 10 months as a global recession reduced demand for its products. The rupee rose 5 percent against the Japanese yen and 9.6 percent versus the euro in the same period.
"This has hurt the competitiveness of Indian exports and further appreciation should be prevented," CII's Director General Chandrajit Banerjee said in an e-mailed statement. "The Reserve Bank of India should intervene in the currency markets."
One-month implied volatility, a measure of expectations for rupee price movements, was unchanged at 7.8 percent today, data compiled by Bloomberg show. The gauge of expected currency swings is quoted by traders as part of option prices.