Bloomberg News

Rupee Gains for First Time in Four Days on Rate-Cut Optimism

June 13, 2012

India’s rupee advanced for the first time in four days on speculation the central bank will lower borrowing costs at a review next week, boosting demand for the nation’s stocks.

The Reserve Bank of India will lower the benchmark repurchase rate to 7.75 percent from 8 percent on June 18, according to 14 of 18 analysts in a Bloomberg News survey. Two expect a reduction to 7.5 percent and two predict no change. The BSE India Sensitive Index (SENSEX) of shares rose for a second day as exchange data show foreign investors added $258.5 million to holdings of Indian stocks in the week through June 12.

“The rupee is being boosted by an expectation that a rate cut would increase inflows,” said Vikas Babu, a currency trader at state-run Andhra Bank (ANDB) in Mumbai.

The rupee advanced 0.2 percent to 55.6875 per dollar in Mumbai, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 12 percent.

Traders are focused on India’s inflation data, due tomorrow, and on the Greek election on June 17 that may signal whether the European nation exits the euro, according to Edelweiss Financial Advisors Ltd.

Wholesale prices probably rose 7.50 percent in May, compared with 7.23 percent in April, according to the median estimate of 37 analysts in a Bloomberg News survey. Industrial production increased 0.1 percent from a year earlier in April, official data showed yesterday, compared with the 1.7 percent median estimate in another Bloomberg survey

“The market is focused on the domestic inflation data, monetary policy and the Greece election,” analysts at Edelweiss Financial, including Mumbai-based Vinay Khattar, wrote in a research note today. “The Indian currency has traded in a range of 55 to 56 per dollar in the last week and that’s expected to continue,” according to the report.

Three-month onshore currency forwards traded at 56.55 a dollar, compared with 56.63 yesterday, and offshore non- deliverable contracts were at 56.68 from 56.86. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.

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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