India Rupee Rises on Inflow Optimism as U.S. Debt Talks Progress

India’s rupee rose on speculation global funds will increase purchases of local stocks as U.S. lawmakers move closer to a budget deal to avoid a debt default.

The benchmark S&P BSE Sensex Index (SENSEX) of stocks advanced 0.6 percent today as exchange data showed overseas investors have bought a net $607 million of shares this month through Oct. 10. Politicians in the U.S. are working on a proposal to suspend the debt ceiling through Feb. 7 and fund the government until Jan. 15, a person familiar with the talks said. The U.S. will not default, former Treasury Secretary Lawrence Summers said in Seoul today.

“A debt deal will be a huge relief and have a direct impact on emerging markets” in terms of increasing inflows, said Ashtosh Raina, head of foreign-exchange trading at HDFC Bank Ltd. in Mumbai.

The rupee gained 0.1 percent to 61.4575 per dollar as of 9:47 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 17 basis points, or 0.17 percentage point, to 14.69 percent.

U.S. Senate Democratic and Republican leaders said yesterday they made significant progress toward an accord. President Barack Obama postponed a meeting with Congressional leaders to give lawmakers more time to reach an agreement.

One-month onshore rupee forwards fell 0.1 percent to 61.96 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts advanced 0.02 percent to 61.97. 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: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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