Bloomberg News

Indian Rupee Rises for First Time in a Week on Stimulus Optimism

October 05, 2011

Oct. 5 (Bloomberg) -- India’s rupee strengthened for the first time in a week on speculation U.S. and European policy makers will boost monetary stimulus to protect economic growth, supporting demand for emerging-market assets.

The currency pared gains after the BSE India Sensitive Index of local shares erased its advance. Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. central bank can take further steps to sustain the recovery in the world’s largest economy. The European Central Bank will cut interest rates at a meeting tomorrow to shield the economies in the region from its debt crisis, according to 11 of 52 economists surveyed by Bloomberg. The others expect no change. The dollar index, which tracks the currency’s performance against six major trading partners, dropped for the first time in six days.

“The rupee trend today would be a short-term one, moving in line with the news out of the U.S. and its impact on the dollar,” said Abhishek Goenka, Mumbai-based chief executive officer at consulting company India Forex Advisors. “However, problems across the global banking sector have begun to permeate into India and this will pressure the rupee going ahead.”

The rupee strengthened 0.1 percent to 49.3475 per dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg.

Offshore forwards indicate the rupee will trade at 50 to the dollar in three months, compared with expectations for a rate of 50.05 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

--Editor: Anil Varma

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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