Rupee in Longest Winning Run Since 2011 as Inflows Seen Resuming

  • Currency climbs to a five-week high in eighth day of gains
  • Investors will return to higher-yielding assets: Edelweiss

India’s rupee rose for an eighth day amid speculation global funds will resume purchases of the nation’s debt after a two-month selloff.

The South Asian nation will grant overseas investors access to an additional 165 billion rupees ($2.5 billion) of sovereign and state-government notes from Jan. 1, as part of a September plan to allow a phased increase in foreign-investment limits. The new quotas will attract funds, according to Edelweiss Financial Services Ltd. and RBL Bank Ltd., after global holdings of rupee-denominated securities dropped 91.6 billion rupees over December and November amid a rise in U.S. interest rates.

“The rupee will be in an appreciative trend as investors return to higher-yielding Indian assets,” said Ankur Jhaveri, co-head of currencies and rates at Edelweiss in Mumbai, adding that the currency will outperform Asian peers.

The rupee climbed to a five-week high of 66.0975 a dollar before closing at 66.1975 in Mumbai, up less than 0.1 percent from Dec. 23, according to prices from local banks compiled by Bloomberg. The currency’s eight-day rising streak is the longest since June 2011 and has contributed to its 0.7 percent advance in December, the second-best performance in Asia excluding Japan. The rupee has declined 4.8 percent in 2015.

Investing in rupees will earn 8 percent, including interest, by end-2016, estimates compiled by Bloomberg show. That’s the most in the region. Indian bond and currency markets were shut Thursday and Friday for local holidays.

Bonds Drop

Ten-year Indian sovereign bonds halted a two-day advance on concern demand for existing securities will weaken as auctions of government debt resume, according to PNB Gilts Ltd. The yield on notes due May 2025 rose one basis point to 7.76 percent, prices from the central bank’s trading system show.

India plans to sell 140 billion rupees of notes this week, according to an issuance calendar on the website of the central bank, which manages the government’s borrowing program. Prime Minister Narendra Modi’s administration last sold debt at a Dec. 11 sale, raising 150 billion rupees after underwriters stepped in to purchase unsold securities.

Concern that supply will soon resume and the uncertainty surrounding the issuance timing of a new 10-year benchmark bond hurt sentiment, said Vijay Sharma, executive vice president for fixed income at PNB Gilts in New Delhi.

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