Bloomberg News

Rupee Strengthens as Slowing Inflation Spurs Inflow Optimism

February 15, 2012

Feb. 15 (Bloomberg) -- India’s rupee strengthened after inflation eased to the slowest pace in more than two years, boosting demand for the nation’s assets.

Wholesale-price increases cooled to 6.55 percent in January, from 7.47 percent the month before, official data showed yesterday. That was the least since November 2009. The BSE India Sensitive Index of shares reached a six-month high after foreign funds boosted holdings of the nation’s stocks by $2 billion this month through Feb. 13, exchange data show.

“The inflation data is a big positive,” said Vikas Babu, a currency trader at state-run Andhra Bank in Mumbai. “There are expectations of inflows, which will support the currency.”

The rupee advanced 0.2 percent to 49.2887 per dollar in Mumbai, according to data compiled by Bloomberg. The currency has rallied 7.7 percent this year after declining 16 percent in 2011. Currency and bond markets in Mumbai are shut tomorrow for a provincial election.

Three-month onshore rupee forwards traded at 50.28 per dollar, compared with 50.32 yesterday, while offshore non- deliverable contracts were at 50.25 from 50.26. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.

--Editors: Andrew Janes, James Regan

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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