Re gains for seventh day in a row

The rupee strengthened as investors based abroad added to their local equity holdings for the seventh day in a row – the longest stretch in more than a year.

The currency rose from a one-week low after an unexpected increase in US durable-goods orders and new-home sales fuelled optimism that the global recession is easing. The benchmark Bombay Stock Exchange Sensitive Index gained almost 12 per cent this week to its highest level in three months.

“Stock markets have shown some gains in recent days and capital flows appear to be improving,” said Sanjay Arya, Mumbai-based treasurer at state-owned Bank of Maharashtra. “That helped the rupee recover modestly.”

The rupee rose 0.3 per cent to 50.60 per dollar at the 5 pm close in Mumbai, according to data compiled by Bloomberg.

Durable-goods orders in the US rose 3.4 per cent in February from the previous month and new-home sales increased 4.7 per cent, according to Commerce Department reports published yesterday. Overseas funds bought a net $173.3 million on March 24, the most since December 10.

Quarterly decline
The rupee is still headed for a fifth quarterly decline – the longest losing streak since 2002. It is the third-worst performer among the 10 most-traded Asian currencies since end- 2007, with a 21 per cent loss. Offshore contracts indicate traders bet the rupee will trade at 50.92 to the dollar in a month, compared with expectations of 51.23 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

The central bank will allow the rupee to decline from current levels to help exporters weather a deepening global recession, HSBC Holdings said, forecasting the currency to fall by almost 7 per cent to a record low of 54 per dollar by the end of the year.