India’s rupee advanced to a two-week high after Prime Minister Manmohan Singh pledged measures to revive economic growth, echoing similar statements from global policy makers.
European Central Bank President Mario Draghi said yesterday that officials stand ready to act to resolve their region’s debt crisis after leaving the benchmark rate at 1 percent. The Dollar Index weakened yesterday as Federal Reserve Bank of Atlanta President Dennis Lockhart said more stimulus should be considered if U.S. growth slows. China cut interest rates today for the first time since 2008.
“Talk of stimulus is positive for the rupee as that may help boost growth and attract overseas investments,” said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. “The dollar’s relative weakness has also underpinned the local currency.”
The rupee advanced 0.8 percent to 54.9450 per dollar in Mumbai, according to data compiled by Bloomberg. It earlier touched 54.9325, the strongest level since May 22. The currency’s one-month implied volatility, a measure of exchange-rate swings used to price options, fell 85 basis points to 11.65 percent. The BSE India Sensitive Index climbed 1.2 percent.
India’s gross domestic product rose 5.3 percent in the first quarter from a year earlier, the least in nine years, government data showed last week. The Reserve Bank of India has more room to cut interest rates after economic growth slowed, Deputy Governor Subir Gokarn said on June 4.
‘Do Everything Possible’
Singh yesterday outlined port projects worth an equivalent of about $6.3 billion for the financial year through March 2013, an investment target of $3.6 billion for Mumbai’s elevated rail corridor and plans to add airports. It also set goals of building 9,500 kilometers (5,904 miles) of roads in the 12-month period, up 18.7 percent from last year, and adding about 18,000 megawatts of power generation capacity.
“In these difficult times we must do everything possible to revive business and investor sentiment,” Singh said in a statement in New Delhi yesterday. “We must work to create an atmosphere which is conducive to investment and to removing any bottlenecks that may be hurting the growth process. We as a government are committed to taking the necessary measures to reverse the present situation.”
Three-month onshore currency forwards traded at 55.86 a dollar, compared with 56.36 yesterday, and offshore non-deliverable contracts were at 55.86 from 56.49. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.