India’s rupee rose the most in Asia this week on speculation policy makers will ease curbs to allow global funds to buy more of the nation’s debt.
Sovereign bonds need to have an open, and not a captive market, and the Reserve Bank of India is talking to the government about limits on foreign portfolio investments in debt securities, Governor Raghuram Rajan said Tuesday. Overseas investors added 9.26 billion rupees ($145 million) to their holdings of rupee-denominated corporate and government notes so far this week, besides buying $278.3 million of shares.
The rupee climbed 0.5 percent from July 31, the most since the five days ended June 19, to 63.8150 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell 0.1 percent on Friday. Government bonds were steady.
“The possibility of higher foreign investment was a major sentiment driver,” said Rohan Lasrado, head of foreign-exchange trading at RBL Bank Ltd. in Mumbai. “The rupee is now more resilient to global volatility and inflows have remained strong.”
One-month implied volatility in the rupee, a gauge of expected swings used to price options, dropped 33 basis points from July 31, snapping a two-week advance, to 5.68 percent, data compiled by Bloomberg show.
India has capped overseas holdings of sovereign debt at $30 billion, seeking to shield local markets from any capital outflows due to global events such as the Federal Reserve raising U.S. interest rates.
The 10-year yield was little changed for the week and from Thursday at 7.81 percent, according to prices from the central bank’s trading system. That’s after the RBI refrained from adding to this year’s three interest-rate cuts on Tuesday.
The monetary authority left its benchmark repurchase rate unchanged at 7.25 percent after consumer inflation accelerated to a nine-month high in June.