Rupee strengthens as stocks bounce back

MARKET ROUND-UP

The rupee gained the most in almost four months as the benchmark stock index rebounded, suggesting investor appetite for risk may return to emerging-market assets.

Exporters such as Tata Consultancy Services, the country's largest software maker, which benefit from a weaker currency when they convert their overseas earnings, bought the rupee after it yesterday dropped the most in 10 months, said Rohan Lasrado, a currency trader at HDFC Bank in Mumbai.

"The rupee is moving in tandem with stocks," said Lasrado. "Many exporters are coming in to exchange their dollars for the rupee as these may be good levels for them," he added.

The local currency climbed 0.4 per cent to 44.4662 against the dollar in Mumbai, the biggest gain since November 16, according to data compiled by Bloomberg.

The Sensex rose 2.3 per cent today. Global funds bought $73.3 million more Indian stocks than they sold on March 2, ending four days of net sales that amounted to $695 million, according to market regulator Securities & Exchange Board of India.

The currency fell 0.8 per cent yesterday, the most since May 15, as the Sensex extended losses to 15 per cent from a record close reached on February 8. Central bank purchases of dollars stemmed the rupee's advance to a 16-month high on February 6.

Exporters may also be selling dollars to buy one-year forward contracts, Lasrado said. Investors who want to sell dollars a year from now using rupees receive 2.86 per cent more than the current exchange rate, compared with 2.82 per cent yesterday, Bloomberg data show.

The Morgan Stanley Capital International Asia-Pacific Index climbed 1.7 per cent today, its first gain since February 27 when a worldwide stocks sell-off began.