India’s rupee jumped to the highest level since early May and stocks rallied as local markets opened after a public holiday.
Emerging-market shares and currencies gained Monday after disappointing U.S. jobs data released Friday weakened the prospects of an increase in interest rates by the Federal Reserve this month. The S&P BSE Sensex index of shares surged 1.6 percent on Tuesday to close at its highest level since April last year. Foreign investors were set to be net buyers of equities for the ninth time in 10 weeks, with inflows of $222 million in the four days through Sept. 1.
Indian sovereign bonds also advanced on Tuesday. Urjit Patel assumed charge as the Reserve Bank of India’s 24th governor on Sept. 4, succeeding Raghuram Rajan. Patel’s first test will come Oct. 4 -- a scheduled monetary policy review -- where investors will gauge if governorship reduces his traditional reticence.
“An interest-rate increase by the Fed is unlikely,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd. “Inflows into stocks remain strong and that’s supporting the rupee.”
The rupee climbed 0.5 percent to 66.5250 a dollar at the close in Mumbai, according to prices from local banks compiled by Bloomberg. It rose to 66.49 earlier, the strongest level since May 9. Tuesday’s gain reduced the currency’s 2016 loss to 0.6 percent, Asia’s worst performance after China’s yuan. RBL Bank expects the rupee to appreciate to 66.40 a dollar in the near term should equity flows sustain their momentum, Lasrado said.
“We don’t expect a change in the RBI’s foreign-exchange management under the new leadership,” he said. “They will love to buy dollars at dips and refrain from intervening should the rupee weaken in line with Asian fundamentals.”
The yield on government notes due January 2026 fell two basis points to 7.10 percent, prices from the central bank’s trading system show. That on the new 10-year security issued last week slumped four basis points to 6.92 percent.
Read: India’s New 10-Year Bond Outperforms on Demand, SBI DFHI Says