Bloomberg News

India’s Rupee Gains Most in a Month on Joint Central Bank Action

December 01, 2011

Dec. 1 (Bloomberg) -- India’s rupee strengthened the most in more than a month after global central banks took steps to prop up economic growth.

The currency rebounded, following its biggest monthly loss in almost two decades, as six monetary authorities led by the U.S. Federal Reserve yesterday made it cheaper to borrow dollars in emergencies. Two hours before the Fed announcement, China cut the amount of cash that banks must set aside as reserves for the first time since 2008.

“Sentiment has changed after the central banks acted yesterday,” said Ravi Ranjit, Mumbai-based chief manager at Federal Bank Ltd. “The action was just a stop-gap measure and the underlying issues are far from being resolved.”

The rupee advanced 1.4 percent to 51.4675 per dollar in Mumbai, according to data compiled by Bloomberg. That was the biggest increase since Oct. 28. The rupee weakened 6.7 percent last month, the most since March 1992.

The slide in the currency to a record low of 52.73 on Nov. 22 prompted Indian policy makers to take measures to boost the supply of dollars in the local financial system. The Reserve Bank of India on Nov. 23 eased rules for companies to borrow abroad and sell foreign currencies through swaps, and raised interest rates on bank deposits for Indians living abroad.

Three-month offshore forwards traded at 52.29 to the dollar, compared with 53.31 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, 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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