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Rupee in Longest Gaining Streak in a Year as Inflows Seen Rising

Sept. 11 (Bloomberg) -- India’s rupee rose for a fifth day, the longest streak since October, on speculation dollar supply is increasing after global funds boosted holdings of local stocks by the most since May.

Overseas funds bought a net $421 million of shares on Sept. 10, the biggest inflow since May 21, exchange data show. The rupee has gained 6.9 percent in the past five days, the biggest rally since 1973 when Bloomberg started compiling data for the currency. Raghuram Rajan, who took charge as governor of the Reserve Bank of India on Sept. 4, announced steps to boost the supply of dollars.

The rupee advanced 0.8 percent to 63.3650 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell as much as 0.6 percent earlier and had touched a record low of 68.845 on Aug. 28.

“A couple of banks sold dollars in the market, it looks like a capital inflow,” said Agam Gupta, Mumbai-based managing director for fixed-income trading at Standard Chartered Plc. “The currency may slowly go towards 61.50 a dollar in coming days unless the Fed tapering is bigger than market expectations.”

Federal Reserve Chairman Ben S. Bernanke and his colleagues will reduce Treasury purchases to $35 billion from $45 billion a month at their Sept. 17-18 meeting, while maintaining mortgage-debt buying at $40 billion, according to the median of 34 responses in a Bloomberg News survey of economists on Sept. 6.

RBI’s Rajan last week announced a plan to provide concessional swaps for banks’ foreign-currency deposits to boost the supply of dollars. This will add $10 billion to the nation’s reserves, Bank of America Merrill Lynch estimates.

One-month implied volatility in the rupee, a measure of expected moves in the exchange rate used to price options, fell 40 basis points, or 0.40 percentage point, to 17.63 percent.

Three-month onshore rupee forwards jumped 0.5 percent to 64.93 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts rose 1 percent to 65.29. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; 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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