India’s Rupee Rebounds From Record as RBI Seen Selling Dollars
India’s rupee rose, rebounding from a record low, on speculation that the central bank sold dollars to stem the currency’s fall. Bonds advanced.
The rupee advanced 0.2 percent to close at 60.7850 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency earlier tumbled as much as 1.5 percent to an unprecedented low of 61.8050, prompting the Reserve Bank of India to intervene, said two traders with knowledge of the matter, who asked not to be identified as the information isn’t public.
“Intervention can help curb the rupee’s weakness in the short term,” Rupa Nitsure, an economist at Bank of Baroda in Mumbai, said in a telephone interview. “The rupee will get sustainable support if India is able to attract inflows.”
India’s record current-account deficit has weighed on the currency, as have capital outflows from emerging markets sparked by concern that the Federal Reserve could reduce monetary stimulus as the U.S. economy strengthens. The central bank increased two interest rates last month and capped daily cash injections into the banking system, seeking to stabilize the rupee and reduce risks to economic growth from the depreciation.
The government today said Raghuram Rajan will take charge as governor of the central bank next month from incumbent Duvvuri Subbarao for a period of three years. Subbarao’s term at the Reserve Bank is due to expire Sept. 4.
The yield on the 7.16 percent government bonds due May 2023 fell one basis points to 8.20 percent in Mumbai, according to prices from the central bank’s trading system. The rate rose to as high as 8.3 percent earlier as a weaker currency stokes inflation in a nation that imports about 80 percent of its oil.
“The rupee’s reversal from a fall may have given some comfort,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank Ltd. (DEVB) in Mumbai.
Three-month onshore rupee forwards fell 0.8 percent to 62.84 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts dropped 1.1 percent to 63.06. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.