Indian Rupee, Bonds Advance as Fed Signals Slower Rate IncreasesKartik Goyal
India’s rupee rose to a two-week high and government bonds advanced after the Federal Reserve signaled it will raise interest rates at a slower pace than earlier estimated, reducing the risk of emerging-market outflows.
The Bloomberg Dollar Spot Index fell the most in six years Wednesday after the Fed said a rate rise in April is unlikely and that it won’t tighten policy until it is “reasonably confident” inflation will return to its target and the labor market improves. The gauge rebounded today. India is much better prepared to face volatility from higher U.S. borrowing costs, Reserve Bank of India Governor Raghuram Rajan said in New Delhi yesterday.
“The markets are drawing comfort from the fact that the Fed rate hikes are not happening anytime soon,” said N.S. Venkatesh, Mumbai-based head of treasury at IDBI Bank Ltd. “India remains a bright spot when the world is struggling.”
The rupee climbed 0.3 percent to close at 62.5175 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency earlier rose to 62.6727, the highest since March 5. It has advanced 0.8 percent this year, the best performance in Asia.
India has seen global funds pour $11.6 billion into local debt and equities this year. The yield on sovereign rupee bonds due July 2024 fell three basis points, or 0.03 percentage point, to 7.76 percent, according to prices from the central bank’s trading system.