India's Rupee Rallies Most Since September on Fed Rate Outlook

  • Investors betting Fed will wait or go slow on tightening: RBL
  • U.S. dollar slumped overnight after disappointing U.S. data

India’s rupee rallied the most since September on speculation disappointing U.S. data will prompt the Federal Reserve to go slow in raising interest rates.

Service industries expanded in January at the slowest pace in nearly two years, a report showed Wednesday, weakening the outlook for growth in the world’s largest economy. That caused the Bloomberg Dollar Spot Index to drop 1.7 percent in its biggest slide since March. The gauge extended declines on Thursday. The Fed in December raised borrowing costs for the first time in a decade, dimming the allure of emerging markets like India, where stocks have seen outflows of $1.7 billion this year.

“The U.S. data have clearly changed the sentiment,” said Rohan Lasrado, the head of foreign-exchange trading at RBL Bank Ltd. in Mumbai. “Investors are now betting the Fed will wait or go slow on tightening.”

The rupee halted a three-day decline, strengthening 0.8 percent to 67.5675 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. That’s the biggest jump since Sept. 18. The currency slumped to 68.26 on Wednesday, near its record low of 68.845 reached in August 2013. It has weakened 2.1 percent this year.

India’s government repurchased sovereign bonds worth 166.5 billion rupees ($2.5 billion) on Thursday, according to a statement from the central bank.

The yield on notes due May 2025 fell one basis point to 7.84 percent, according to prices from the Reserve Bank of India’s trading system. That on the securities due January 2026, the new 10-year debt, also dropped one basis point to 7.71 percent.

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