17 Sep 2009
MUMBAI: The rupee had its biggest advance in more than six weeks as speculation of an economic recovery is gathering pace in the US, encouraged investors to add to holdings of emerging-market assets.
The rupee climbed 0.9% to close the day at 48.23/24 per dollar on Wednesday. That is the biggest gain since July 31 and the strongest closing level since August 13. The currency has appreciated 1.2% this month.
Offshore contracts indicate bets the rupee will trade at 48.26 to the dollar in a month, compared with expectations for a rate of 49.74 at the end of last week.
Currencies and shares rose across most of Asia’s emerging markets after Federal Reserve chairman Ben Bernanke said on Tuesday the worst US recession since the 1930s “is very likely over,” and a report showed retail sales in the world’s biggest economy increased the most in three years.
“The rupee is stronger because of the fund flows the stock market is attracting,” said Krishnamurthy Harihar, a Mumbai-based treasurer at the Indian unit of FirstRand, South Africa’s second-largest financial services company. “The near-term outlook is for the rupee to gain as it seems unlikely the economic stimulus packages will be withdrawn anytime soon.”
In the bond market, the benchmark 10-year papers gained for a fourth day, the best run since the notes were issued two months ago, after RBI offered to buy existing debt at an auction on Thursday.
Yields on most-traded notes due 2019 fell to the lowest level in a month after RBI said on Tuesday that it will purchase as much as Rs 6,000 crore ($1.2 billion) of securities. The government is scheduled to borrow record amounts in the fiscal year ending March 31.
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