The rupee strengthened for a second day as Asian stock gains added to optimism the region’s economic recovery was attracting foreign investors.
The currency has rebounded from a seven-week low against the dollar after the government said this week that growth in Asia’s third-largest economy quickened in the quarter to June. The rupee also gained on speculation some exporters converted overseas earnings into the local currency. The rupee advanced 0.1 per cent to Rs 48.915 a dollar at the 5 pm close in Mumbai, according to data compiled by Bloomberg. It is the worst performer among Asian currencies this quarter, with a 2.1 per cent decline.
Offshore contracts indicated that the rupee would trade at Rs 49.03 to a dollar in a month, compared with expectations of Rs 49.10 yesterday.
7-year bonds decline
Seven-year bonds declined, pushing yields toward a nine-month high, on speculation some investors will sell to purchase debt at an auction tomorrow.
The government is scheduled to sell Rs 12,000 crore ($2.5 billion) of notes as part of its plan to raise a record Rs 4.51 lakh crore in the current financial year to fund economic stimulus spending. Eight states were also set to offer Rs 8,350 crore of 10-year bonds on September 8, the central bank said yesterday.
The 7.02 per cent note due August 2016 yielded 7.44 per cent at the 5:30 pm in Mumbai, up seven basis points from yesterday, according to the central bank’s trading system. The price fell 0.37 per cent, or 37 paise per Rs 100 face amount, to Rs 97.73.
India’s government is preparing to sell Rs 5,000 crore each of 6.49 per cent bonds due 2015 and 6.9 per cent securities due 2019, plus Rs 2,000 crore of 8.24 per cent debt maturing in 2027.
Bonds also fell as the Reserve Bank bought Rs 2,230 crore of existing debt in open-market operations today, less than a planned Rs 6,000 crore.
India’s wholesale prices fell the least in 12 weeks, suggesting that inflation may soon turn positive in Asia’s third-largest economy. The wholesale-price index fell 0.21 per cent in the week to August 22 from a year ago, the government said today.
Futures, swaps
In the derivatives market, the 10-year bond future maturing by December 31 was at 8.20 per cent, while the contract due March 31 was at 8.36 per cent, according to the Web site of the National Stock Exchange of India Ltd.
The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, advanced. The rate, a fixed payment made to receive floating rates, rose to 6.42 per cent from 6.38 per cent yesterday.
