India Rupee Climbs as Delay in Fed Liftoff Seen Boosting Inflows

  • Asian currencies rally as dollar slides on weak U.S. data
  • Rupee debt sees biggest three-day inflow since August 2014

India’s rupee advanced for a second day on speculation inflows into the nation’s assets will get a boost after weak U.S. data pared odds of a Federal Reserve interest-rate increase this year.

Foreign holdings of rupee-denominated notes climbed 117.62 billion rupees ($1.8 billion) in the last three days, the biggest increase since August 2014, as India widened access to its bond market. A gauge of dollar strength slipped the most in seven weeks Wednesday as U.S. retail sales rose less-than-estimated in September. Fed futures contracts show a 27 percent chance the central bank will raise rates before the end of 2015, down from 41 percent at the start of this month.

The rupee strengthened 0.3 percent, the most this week, to 64.8250 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. Sovereign bonds advanced for a third day.

“We expect the inflows to remain strong,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. “Weak data prints in the U.S. have boosted Asian currencies.”

The rupee has climbed 1.2 percent this month, after rallying 1.4 percent in September in the best performance among 24 emerging-market exchange rates tracked by Bloomberg.

The increase in foreign holdings comes as India granted global funds greater access to its debt market, which included allowing them to buy bonds issued by state governments for the first time from Monday. The National Security Depository Ltd. data show that overseas investors have in just three days exhausted all of their investment limit of 35 billion rupees for state notes for this year. They have bought a net $410.10 million of local shares this month.

The yield on the sovereign bonds maturing May 2025 fell one basis point to 7.55 percent, according to prices from the Reserve Bank of India’s trading system. It slumped to 7.51 percent on Oct. 5, the lowest close for benchmark 10-year debt since July 2013.

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