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India’s Rupee Gains on Funds Inflow Optimism Before Fed Decision

Oct. 30 (Bloomberg) -- India’s rupee rose, erasing earlier losses, on optimism global funds will boost purchases of the nation’s stocks as economists predict the Federal Reserve will maintain its record stimulus.

The U.S. monetary authority will keep buying $85 billion of bonds each month until March, according to a Bloomberg poll of economists, as data yesterday showed U.S. consumer confidence fell and an Oct. 22 report revealed jobs growth slowed in September. The S&P BSE Sensex Index of shares climbed to a record close as exchange data showed global funds bought a net $2.5 billion of Indian stocks this month through yesterday.

“The Fed is unlikely to dent equity sentiment,” analysts at Barclays Plc, including Cagdas Aksu in London, wrote in a research report today. “We expect no changes to Fed policy and few changes to the statement.”

The rupee rose 0.1 percent to 61.2375 per dollar in Mumbai after dropping as much as 0.4 percent, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped 71 basis points, or 0.71 percentage point, to 9.74 percent.

India’s central bank yesterday raised its benchmark repurchase rate to 7.75 percent from 7.50 percent to fight accelerating inflation, while further easing emergency liquidity curbs that were imposed in July to support the rupee.

Three-month onshore rupee forwards rose 0.3 percent to 62.54 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts advanced 0.2 percent to 62.70. 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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