Stock gains boost rupee

India's rupee advanced for a second week as stock gains increased optimism that overseas funds will return to buy emerging-market assets. The currency appreciated for a fourth day, its best run in more than a month, as offshore non-deliverable forward contracts showed traders reduced bets for how far the rupee will decline in a month. The MSCI Asia Pacific Index of stocks climbed for a second week and India's benchmark index rose to a one-week high.

“The global equity markets appear to be less volatile which will help the rupee,” said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. “I expect flows into India to rise and the rupee to advance in the near term.”

The rupee strengthened 0.4 percent this week to 48.695 a dollar at in Mumbai, the highest since January 19, according to data compiled by Bloomberg. It may advance to Rs 48.50 in a week, Babu said.

The median estimate of 25 strategists and economists surveyed by Bloomberg is for the rupee to rise to Rs 47.95 by the end of the year.

The government will announce more measures to arrest the economic slowdown, Finance Minister Pranab Mukherjee said. The steps will be aimed at labour-intensive industries in India's economy, which may expand around 7 per cent in the year ending March 31, Mukherjee said.

Offshore contracts indicate traders bet the rupee will trade at Rs 48.81 to the dollar in a month, compared with expectations for Rs 49.05 a week ago. 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 author is a Bloomberg News columnist. The opinions expressed are his own