Bloomberg News

Rupee Forwards Rise a Second Day on Europe Optimism, U.S. Data

October 17, 2012

India’s rupee forwards strengthened for a second day after data showed U.S. industrial output grew faster than economists estimated and as speculation grew that Spain will seek a bailout.

Two German lawmakers yesterday said the country is open to providing aid for Spain, signaling a softening of resistance before a summit of European Union leaders tomorrow. Production in the world’s largest economy rose 0.4 percent in September, according to a report yesterday, compared with a forecast of 0.2 percent in a Bloomberg survey. India’s factory output rose 2.7 percent in August, the most since February, government figures showed on Oct. 12. Global funds poured $1.8 billion into Indian stocks this month, regulator data show.

“Since German opposition has eased, Spain will probably ask for and receive help,” said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong. “There is hope among investors that policy makers in Europe will alleviate pressures, and this is boosting risk appetite and the rupee, which is dependent on sentiment and capital flows.”

Three-month onshore rupee forwards advanced 0.1 percent to 53.80 a dollar, according to data compiled by Bloomberg. Offshore non-deliverable contracts were little changed at 53.63 versus 53.64. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The rupee was little changed in the spot market at 52.8800 per dollar in Mumbai, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings, was unchanged at 10.70 percent.

Michael Meister and Norbert Barthle, officials within German Chancellor Angela Merkel’s Christian Democratic bloc, said yesterday a precautionary credit line for Spain “would be a possible move.” Spain retained its investment-grade credit rating from Moody’s Investors Service, which cited a reduction in the risk of losing market access.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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