Rupee Rises to Six-Week High as Fed Outlook Boosts Risk Appetite

  • Currency gains for fifth day in longest winning run since July
  • Delay in U.S. tightening to boost Indian assets: DCB Bank

India’s rupee rallied to a six-week high and sovereign bonds advanced amid speculation demand for emerging-market assets will be sustained after weaker-than-expected U.S. jobs data reduced odds the Federal Reserve will increase interest rates this year.

A gauge of the dollar’s strength dropped to a two-week low on Friday after U.S. wages stagnated and the hiring figures disappointed economists. Traders see a 32 percent probability that the Fed will tighten by December, down from 58 percent a month ago, according to Fed funds futures data compiled by Bloomberg. Higher U.S. rates will damp the allure of riskier assets.

The rupee rose 0.3 percent from Oct. 1 to 65.30 a dollar in Mumbai Monday, prices from local banks compiled by Bloomberg show. It had advanced during the day to 65.20, the strongest level since Aug. 20. Indian markets were shut Friday for a public holiday. The currency has climbed 1.3 percent in the past five days in its longest winning streak since July as India last week relaxed curbs on foreign ownership of its debt.

“The weak U.S. data is leading investors to believe that a hike in interest rates won’t be coming soon,” said Navin Raghuvanshi, a currency trader at DCB Bank Ltd. in Mumbai. “That’s boosting the rupee” as a delay in U.S. tightening is positive for local assets, he said.

The yield on Indian government notes due May 2025 dropped five basis points to 7.51 percent on Monday, according to prices from the Reserve Bank of India’s trading system. That’s the lowest level for benchmark 10-year debt since July 2013.

Ten-year bonds completed their biggest weekly gain since June on Oct. 1, with the yield slumping 15 basis points, after the RBI surprised investors with a larger-than-estimated interest-rate cut on Sept. 29 and said the $30 billion limit on overseas ownership of sovereign bonds will be raised. Foreign holdings of local corporate and government securities rose 6.76 billion rupees ($103.5 million) last week, data from the National Securities Depository Ltd. show.

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