Rupee Pares Gain After India Raises Foreign-Debt Limit
India’s rupee pared gains after the government announced measures, such as increasing the debt ownership limit for foreigners, to support the currency.
The government raised the ceiling on the amount of rupee- denominated government bonds overseas investors can hold by $5 billion to $20 billion, the central bank said in an e-mailed statement today. The combined limit on sovereign and corporate debt was last increased to $60 billion from $50 billion in November. The rupee, which touched a record low of 57.3275 per dollar on June 22, has fallen 6.8 percent this year, the worst performer among the 10 most-traded currencies in Asia.
“Policy makers have put their weight behind the rupee,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd. (DEVB) in Mumbai. “Although the measures have fallen short of what the broader expectations were.”
The rupee advanced 0.2 percent to 57.0150 per dollar at the 5 p.m. close in Mumbai after trading as much as 1.3 percent stronger prior to the announcement, according to data compiled by Bloomberg. The currency may climb to 56.30 this week, Raghuvanshi forecast.
The Reserve Bank of India also announced in its statement a reduction in the lock-in period for overseas investors in infrastructure bonds to one year from three years. Indian manufacturing and infrastructure companies that have foreign- exchange earnings will also be allowed to borrow from abroad to repay some local-currency loans, the RBI said in the statement.
Three-month offshore non-deliverable forwards traded at 58.21 a dollar, compared with 58.34 on June 22. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.
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