Sept. 28 (Bloomberg) -- India’s rupee rose past 49 a dollar to the highest level in a week on optimism European leaders will find a solution to contain the region’s debt crisis.
The currency extended its biggest gain since December after Greek Prime Minister George Papandreou won parliament backing yesterday for a property tax that would pave the way for further aid, while German Chancellor Angela Merkel said Europe’s largest economy is ready to offer assistance. Today’s performance is only a “short-term reprieve” for the markets, according to Sailesh K. Jha, head of Asia strategy at Skandinaviska Enskilda Banken AB.
“There is some optimism after the positive news out of Europe,” Singapore-based Jha said. “However, there are still a lot of details to be worked out in terms of the European policy announcements, so over the next several weeks we will see pressure on equity markets pick up again and with that we will also see the dollar strengthening against Asian currencies.”
The rupee strengthened 0.7 percent to 48.7525 a dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It earlier touched 48.6575, the highest level since Sept. 21. The currency rose the most in almost 10 months yesterday, and is down 8.4 percent this quarter.
Offshore forwards indicate the rupee will trade at 49.43 to the dollar in three months, compared with expectations for a rate of 49.78 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
--Editors: Andrew Janes, Sam Nagarajan
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