Rupee Has Weekly Gain as India Eases Bond Cap for Foreigners

India’s rupee completed a weekly gain on optimism the nation will attract more capital as limits on inward investment in government debt and the insurance business are relaxed.

The Reserve Bank of India this week increased the cap for foreign institutional investors by $5 billion and said additional purchases must be in notes maturing in at least three years. Finance Minister Arun Jaitley said yesterday the cabinet approved a budget proposal of allowing 49 percent foreign direct investment in the insurance industry.

“The decisions to raise the FII debt limit and taking the process of FDI insurance forward are clearly positive for the rupee,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, outside New Delhi. “There are inflows happening but the month-end dollar demand from oil importers is limiting rupee gains.”

The currency rose 0.3 percent this week to 60.1050 per dollar at the close in Mumbai, the first gain since the five days ended July 4, according to prices from local banks compiled by Bloomberg. It was unchanged from yesterday.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 24 basis points, or 0.24 percentage point, to 5.58 percent, according to data compiled by Bloomberg. It dropped 94 basis points from a week ago.

Three-month offshore non-deliverable forwards on the rupee were little changed at 60.78 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the greenback.