India’s Rupee Strengthens for a Third Day on Inflow Optimism

India’s rupee advanced for a third day on optimism foreign investors will keep buying the nation’s assets as economic growth recovers.

Global funds added $1.7 billion to holdings of local-currency bonds and $151 million to stocks this month, exchange data show. The S&P BSE Sensex Index of shares climbed to a one-month high today after the Standard & Poor’s 500 gauge in the U.S. rose to a record yesterday. India’s economy will expand 4.9 percent in the year through March, the government estimates, from a decade-low 4.5 percent in the previous 12 months.

The rupee strengthened 0.2 percent to 61.9575 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. That pared its loss this year to 0.3 percent. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, slid 26 basis points, or 0.26 percentage point, to 7.77 percent.

“The rupee is seen getting a helping hand from the continuous flows into the debt market and consistent rise in the domestic stock markets,” said Abhishek Goenka, chief executive officer at India Forex Advisors Pvt. in Mumbai. Local importers should buy dollars around the 61.9 or 61.8 per dollar levels, he said.

The Indian currency will probably trade between 61.8 and 62.5 against the greenback in the coming days, before weakening toward 64 in the months ahead, Goenka predicts.

Three-month offshore non-deliverable forwards rose 0.1 percent to 63.03 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

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