India’s rupee strengthened for a second day before the capital markets regulator auctions debt-purchase permits to foreign investors, even as a nationwide strike lowered trade volumes.
The Securities & Exchange Board of India will sell 666.7 billion rupees ($12.3 billion) of the quotas today, according to a notice on its website. Overseas funds’ investments in local-currency debt rose to a record $33.7 billion this month, exchange data show, as the nation’s 10-year notes offer a yield premium of 576 basis points over U.S. Treasuries.
“The outlook for the rupee is improving,” analysts at Credit Agricole CIB, including Hong Kong-based Mitul Kotecha, wrote in a research report today. “One supportive factor for the rupee is the strength of portfolio capital flows into the country.”
The rupee advanced 0.3 percent from Feb. 18 to 54.0675 per dollar in Mumbai, according to data compiled by Bloomberg. The market was shut yesterday for a local holiday. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 15 basis points, or 0.15 percentage point, to 9.10 percent.
Eleven trade unions across India’s political spectrum are on a two-day strike starting today, to protest against issues including rising prices and the government’s sale of state assets. The absence of some banking staff will keep currency trading levels low, according to traders including Sudarshan Bhatt, chief dealer at state-run Corporation Bank in Mumbai.
Three-month onshore rupee forwards traded at 55.12 per dollar, compared with 55.32 on Feb. 18, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.02 versus 55.24 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.