The rupee approached its strongest level in more than six weeks as foreigners stepped up purchases of the nation’s stocks, taking total holdings to the highest since December 2007.
The currency rose for the sixth time in seven days after exchange data showed global funds bought $1.4 billion more of local shares than they sold last week, the most in two years. India’s economic growth accelerated to 6.1 per cent in the quarter ended June 30, a pace of expansion that’s second only to China in Asia. The Asian Development Bank raised on September 22 its 2009 growth forecast for the region, excluding Japan, to 3.9 per cent from 3.4 per cent.
The rupee climbed 0.1 per cent to 47.9725 a dollar as of the 5 pm in Mumbai, according to data compiled by Bloomberg. The currency has gained 1.8 per cent this month.
Offshore contracts indicated that the rupee would trade at 47.97 to the dollar in a month, compared with expectations of 48.02 yesterday.
Foreign funds have bought Indian equities worth a net $10.45 billion this year, boosting their holdings to $65.7 billion, according to the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index, which added 0.4 per cent on Thursday, has surged 77 per cent in the past six months.
The rupee dropped earlier on speculation that local importers increased purchases of foreign currency to settle month-end bills. Refiners including Indian Oil Corporation, the nation’s biggest, may have stepped up dollar buying to pay for crude oil imports. The commodity gained 53 per cent in New York this year.
10-year bonds decline
India’s 10-year bonds fell for the second time in three days on speculation that investors sold securities before a debt auction tomorrow.
Yields on the benchmark notes due 2019 reversed an early decline as the government prepared to sell Rs 12,000 crore ($2.5 billion) of bonds, Rs 4,000 crore more than planned. This is the second week the government is raising more debt than planned after cancelling a sale in August. The government plans to borrow a record Rs 4.51 lakh crore from the bond market in the fiscal year ending March 31.
“The supply pressure is offsetting any optimism that is being priced in,” said Baljinder Singh, a fixed-income trader at state-owned Andhra Bank in Mumbai. “I am expecting a further rise in yields in the run-up to the auctions,” he said.
The yield on the most-traded 6.90 per cent note due July 2019 climbed two basis points to 7.11 per cent as of the 5:30 pm close in Mumbai, according to the central bank’s trading system. The price fell 0.11 per cent, or 11 paise per Rs 100 face amount, to Rs 98.55. A basis point is 0.01 percentage point.
Bonds also slipped after the central bank on Thursday purchased fewer-than-planned securities in open market operations.
The Reserve Bank of India bought Rs 1,970 crore of existing debt, less than the planned Rs 6,000 crore. The bank bought Rs 4,525 crore of existing debt in open market operations on September 17, following purchases of Rs 4,300 crore on September 10.
The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, was little changed. The rate, a fixed payment made to receive floating rates, was at 6.60 per cent, compared with 6.61 per cent yesterday.
Call ends steady
Call money rate ended steady on Thursday as ample liquidity enabled banks to raise funds at the lower end of the interest rate corridor, dealers said.
on Thursday, the one-day call money rate ended at 3.20-3.25 per cent compared with Wednesday’s close of 3.35-3.40 per cent.
CBLOs ended at a weighted average rate of 2.44 per cent, down from over 3 per cent in early trade and 2.97 per cent on Wednesday as demand for funds tapered off in the course of trade. The CBLO rate fell to an intraday low of 0.20 per cent.
