Aug. 7 (Bloomberg) -- India’s rupee rose to the highest level in almost three weeks after Germany backed the European Central Bank’s bond-buying plan, which may ease the debt crisis and boost demand for emerging-market assets.
German Chancellor Angela Merkel’s government is “not worried” by ECB President Mario Draghi’s proposal to bring down borrowing costs in Spain and Italy, her spokesman Georg Streiter said in Berlin yesterday. While these comments will boost global risk appetite and the rupee, investors will wait for Indian Finance Minister Palaniappan Chidambaram to unveil his promised road map to revive the economy, according to Westpac Banking Corp.
“Merkel’s statement reduces the need for safe-haven investments,” said Jonathan Cavenagh, a strategist at Westpac in Singapore. “I will not be too excited about the rupee unless we see more action from the Indian government.”
The rupee advanced 0.8 percent to 55.0690 per dollar in Mumbai, the biggest gain since July 26, according to data compiled by Bloomberg. The currency touched 55.0650 earlier, the strongest since July 18. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 95 basis points, or 0.95 percentage point, to 10.35 percent.
Chidambaram, making his first statement after being named India’s finance minister last week, said yesterday that he will seek fiscal consolidation and work to revive investment.
“The economy is challenged by a number of factors,” he said at a briefing in New Delhi. “With sound policies, good governance and effective implementation we would be able to overcome these challenges. Uppermost in my mind is the duty to regain the confidence of all stakeholders.”
Three-month onshore rupee forwards traded at 56.13 per dollar, compared with 56.47 yesterday, and offshore non-deliverable contracts were at 56.04 from 56.45. 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 email@example.com
To contact the editor responsible for this story: James Regan at firstname.lastname@example.org