The rupee strengthened the most in six weeks, as global funds stepped up purchases of the country’s shares to take advantage of growth in Asia’s third-biggest economy.
Foreign investors bought $1.6 billion more Indian stocks than they sold this month through July 11, taking net purchases this year to $2 billion, according to exchange data. India’s $1.3-trillion economy expanded 7.8 per cent in the first quarter from a year earlier, compared with 8.3 per cent in the previous three months, government data show.
“The inflow of funds into Indian equities is positive for the rupee,” said J Moses Harding, a Mumbai-based executive vice-president at IndusInd Bank Ltd.
The rupee advanced 0.4 per cent to 44.525 per dollar at the close in Mumbai, according to data compiled by Bloomberg, its strongest close since June 1. The currency touched 44.7675 yesterday, the weakest level since June 30.
Offshore forwards indicate the rupee would trade at 45.02 to the dollar in three months, compared with expectations of 45.03 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
Rupee decline
Government bonds declined due to selling pressure from banks and companies.
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The 7.80 per cent government security maturing in 2021 dropped to Rs 96.66 from yesterday’s close of Rs 96.83, while its yield moved up to 8.30 per cent from 8.28 per cent. The 8.13 per cent government security maturing in 2022 slipped to Rs 98.03 from Rs 98.19, while its yield edged up to 8.40 per cent from 8.38 per cent.
The 7.83 per cent government security maturing in 2018 fell to Rs 97.35 from Rs 97.45, while its yield looked up to 8.35 per cent from 8.33 per cent. The 8.08 per cent government security maturing in 2022, the 7.59 per cent government security maturing in 2016, the 8.28 per cent government security maturing in 2027 and the 8.26 per cent government security maturing in 2027 were also quoted lower at Rs 97.66, Rs 97.13, Rs 97.25 and Rs 97.20, respectively.
The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 32,735 crore from 18 bids at the one-day repo auction at a fixed rate of 7.50 per cent.
Call rate recovers
The call rate recovered to close at 7.45 per cent at the overnight call money market here today, owing to fresh buying support from borrowing banks. The call money rate finished higher from the overnight closing level of 7.30 per cent. It moved in the range of 7.55 per cent and 7.40 per cent.