The Indian rupee halted a three-day losing streak following comments by the U.S. Federal Reserve Chair Janet Yellen that she intends to retain the stimulus program that has spurred investors to buy assets in emerging economies.
Yellen said on Wednesday that the benchmark borrowing rates will remain as they are in order to ensure employment and inflation are well within the Fed’s targets.
The rupee advanced 0.2 percent to trade at 60.2925 a dollar in Mumbai, based on Bloomberg data. The currency has gained 2 percent in the last three months, which saw it hit 59.60 in early April, its strongest mark since July. The rupee has so far plunged 0.2 percent this week.
India’s BSE Sensex, which tracks stocks, rose 1.6 percent. This was its strongest in at least a week and its first gain in four days.
“Yellen’s comments have been positive for the local stock markets,” which in turn supported the rupee, said Paresh Nayar, a Mumbai-based head of currency and money markets at FirstRand Ltd.
The currency’s one-month implied volatility, which measures expected shifts in the exchange rate used to assign prices to options, plunged 0.01 percentage points, or one basis points, to 12.0350 percent.
Some analysts pointed out that the room for rupee to advance is limited due to declining factory activity and surging inflation. The country’s wholesale-price index gained 5.7 percent last month, its highest in three months. Factory output shrunk 1.9 percent in February from a year ago, its steepest decline since last May. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at firstname.lastname@example.org