India’s rupee rose to the highest level in more than a week after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy will continue to need stimulus, boosting the prospect of the flow of funds to emerging markets.
The currency extended its rebound from a record low of 61.2125 per dollar touched on July 8, as Indian regulators curbed speculation in rupee derivatives. Global funds have cut holdings of local debt by $8.1 billion since May 22, when the Fed signaled it may reduce asset purchases this year. The Bloomberg Dollar Index, which tracks the greenback against 10 major trading partners, fell for a second day.
The rupee advanced 0.4 percent to 59.4250 per dollar as of 10:05 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. The currency touched 59.3200 earlier, its strongest since July 2.
“Bernanke’s comments have led to a dollar slump and risk-on rally in the market,” said Samir Lodha, Mumbai-based senior partner at QuantArt Market Solutions Pvt. “The rupee should stabilize at current levels for now and may strengthen to about 58 or 57 if investors receive more signals that the U.S. stance will be accommodative.”
Bernanke backed sustained stimulus in a speech yesterday, after minutes of the Fed’s June meeting showed officials debating whether to end the central bank’s $85 billion-a-month of bond purchases.
The Reserve Bank of India barred lenders from proprietary trading in currency futures and exchange-traded options, according to a July 8 statement on its website. The Securities and Exchange Board of India said separately it will raise margin requirements and cap open positions in such contracts.
The RBI also asked Indian oil refiners, the largest buyers of foreign currency, to purchase dollars only from the State Bank of India (SBIN), the nation’s biggest lender, CNBC-TV18 television channel reported July 9, citing people it didn’t identify.
Three-month onshore rupee forwards rose 0.7 percent to 60.36 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts gained 1 percent to 60.41. 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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