India Rupee Halts Eight-Day Advance on Importers' Dollar Demand

  • Currency has strengthened 0.4 percent so far in December
  • Bonds pressured by supply concern as sales resume: PNB Gilts

India’s rupee fell on speculation importers took advantage of its eight-day rally to buy dollars more cheaply to pay month-end bills.

The rupee weakened 0.3 percent to 66.3950 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. It climbed 1.4 percent in the last eight days, the longest run of gains since June 2011. The currency has risen 0.4 percent in December in the second-best performance in emerging Asia.

“Importers perhaps found the levels attractive to accumulate dollars,” said Navin Raghuvanshi, a Mumbai-based foreign-exchange trader at DCB Bank Ltd. The increased foreign-investment limits for Indian bonds are expected to bring inflows and that’ll be positive for the rupee, he said.

The South Asian nation will grant overseas investors access to an additional 165 billion rupees ($2.5 billion) of sovereign and state-government notes from Jan. 1, part of a September plan to allow a phased increase in the limits. DCB Bank joins Edelweiss Financial Services Ltd. and RBL Bank Ltd. in predicting this week that the new quotas will attract global funds, whose holdings of rupee-denominated debt have declined 98.2 billion rupees over December and November amid a rise in U.S. interest rates.

Debt Supply

The yield on sovereign notes due May 2025 was little changed at 7.76 percent, prices from the central bank’s trading system show. It rose one basis point on Monday after increasing two basis points last week.

India plans to sell 140 billion rupees of government notes at an auction on Jan. 1, according to a central bank statement after the close of markets Monday. The government last sold debt at a Dec. 11 sale, raising 150 billion rupees after underwriters stepped in to purchase unsold securities.

Concern that supply will soon resume and the uncertainty surrounding the issuance timing of a new 10-year benchmark bond is hurting sentiment, Vijay Sharma, executive vice president for fixed income at PNB Gilts Ltd. in New Delhi, said on Monday.

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