India’s rupee approached a one-month high after Prime Minister Manmohan Singh secured the support of a key regional party before tomorrow’s vote in parliament’s upper house on allowing foreign-owned supermarkets.
The currency has rallied 3.2 percent from an almost three- month low of 55.8825 per dollar on Nov. 26, when Moody’s Investors Service maintained its stable outlook on the nation’s credit rating. A vote yesterday in the lower house backing Singh’s plan to allow the entry of overseas retail chains paved the way for companies including Wal-Mart Stores Inc. (WMT:US) and Tesco Plc (TSCO) to open stores in Asia’s third-largest economy.
“This shows policy reforms are moving in the right direction and is a source of encouragement,” said Anjali Verma, an economist in Mumbai at PhillipCapital India Pvt. “It’s a short-term boost for markets. We’ll need to see more of such measures to sustain rupee appreciation.”
The rupee strengthened 0.8 percent to 54.1375 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 54.0450 earlier, which was the strongest since Nov. 7.
Mayawati, the leader of the Bahujan Samaj Party, said she would support the government at tomorrow’s vote as it had given state administrations the power to block the proposals if they wished. With 15 members in the chamber, her party’s votes should push Singh past the number he needs to win the ballot, said political analyst Satish Misra.
The September move to enable overseas companies to open stores in India didn’t require parliamentary approval to become law. Singh’s government agreed to a vote to end protests that had stalled legislative business.
The ballot isn’t a trust vote or referendum and a loss would have embarrassed the government.
One-month implied volatility, a measure of expected moves in exchange-rates used to price options, rose to 10.20 percent from 10 percent yesterday.
While 253 members of the 545-member lower house supported the government’s retail plan, 218 voted against it. Singh’s Congress Party-led coalition prevailed after two regional parties that oppose the arrival of foreign supermarkets walked out rather than vote with ideological rivals.
India’s economy expanded 5.3 percent in the three months through September from a year earlier, matching the slowest pace since 2009. Central bank Governor Duvvuri Subbarao cut in October the growth forecast for the fiscal year ending March 31 to 5.8 percent, the least in a decade, from 6.5 percent.
Three-month onshore rupee forwards weakened 0.1 percent to 55.07 per dollar, according to data compiled by Bloomberg. Offshore non-deliverable contracts fell 0.2 percent to 54.99. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
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