Re trades near 7-month high on capital inflows

The rupee traded near a seven-month high as overseas funds added to their biggest monthly investment in the nation’s stocks since October 2007.

The rupee closed at 47.045 per dollar at the close, compared with 47.025 yesterday, according to data compiled by Bloomberg. The currency touched 46.75 earlier, the strongest since November. It is up 7.8 per cent this quarter, the third-best performance among the 10 most-traded Asian currencies.

The currency is set to gain for a third week against the dollar, extending the biggest monthly advance on record, on optimism a global economic recovery will boost investor appetite for emerging-market assets. India’s Bombay Stock Exchange Sensitive Index of shares has jumped 53 per cent so far this quarter. The rupee erased the day’s gains on speculation importers bought the dollar to pay for shipments from abroad.

 

Offshore contracts indicate bets the rupee will trade at 47.12 to the dollar in a month, compared with expectations of 47.17 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 Indian currency climbed 6.2 per cent against the yuan in May, the biggest monthly gain in at least a decade, as India’s trade deficit narrowed by 49 per cent since November, while China’s surplus fell by 67 per cent. Exports are equivalent to 15 per cent of the Indian economy, compared with more than 60 per cent in China.

The rupee has risen 11 per cent from a record low of 7.628 per yuan on March 3, partly driven by the victory of India’s ruling Congress party in May elections. Standard Chartered forecasts the rupee will climb to 6.63 by the end of the year.

Bonds gain on borrowing plan
Ten-year bonds gained for a fourth day after the government said it will stick to its borrowing plan and as the central bank prepared to buy existing securities at an auction tomorrow. Benchmark yields declined after Finance Secretary Ashok Chawla yesterday said that total borrowing in the 12 months through March 31 will stay within target even as some scheduled debt sales are advanced.

The Reserve Bank of India said yesterday it will offer to purchase as much as Rs 6,000 crore ($1.3 billion) in open-market operations tomorrow. “

The yield on the 6.05 per cent note due February 2019 fell nine basis points to 6.55 per cent at the close in Mumbai, according to the central bank’s trading system. The price rose 0.64, or 64 paise per 100 rupee face amount, to 96.42.

India plans to raise Rs 3.62 lakh crore from debt sales in the current fiscal year. The government said this week it will offer more than planned for a third straight time at an auction scheduled on June 5.