Rupee Climbs to Seven-Week High as India's Growth, Rates Spur Fund Inflows
Aug 9 (Bloomberg) -- Philip Poole, global head of macro and investment strategy at HSBC Global Asset Management, talks about the impact of rising food prices on emerging market currencies. He speaks with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
India’s rupee rose to a seven-week high on speculation an improving economy and rising interest rates will spur overseas demand for the nation’s assets.
Global funds on Aug. 5 bought more Indian shares than they sold for a 23rd day, the longest run of net purchases since Bloomberg began tracking the data at the end of 1998. They pumped in $4.3 billion in that time, lifting their holdings to $83.8 billion, Securities & Exchange Board of India data showed. The central bank on July 27 raised interest rates for the fourth time this year and increased its economic growth forecast for the fiscal year that began April 1 to 8.5 percent from 8 percent.
“The India growth story is strong and the increase in interest rates is helping rupee appreciation,” said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. “We have received a very good amount of fund flows in the past month.”
The rupee appreciated 0.1 percent to 46.1275 per dollar as of the 5 p.m. close in Mumbai, the highest since June 21, according to data compiled by Bloomberg. It touched 45.96 on Aug. 6, the strongest intraday level since June 22. The currency has risen 1.3 percent in the past month.
The RBI increased interest rates to combat inflation, which has stayed above 10 percent for a fifth month in July. The reverse-repurchase rate, at which it absorbs excess cash from banks, was raised by half a percentage point to 4.5 percent. It lifted the repurchase rate, which it charges on overnight loans, to 5.75 percent from 5.5 percent.
Offshore forward contracts indicate the rupee will trade at 46.69 in three months, compared with expectations for a level of 46.70 at the end of last week. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net
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