India’s Rupee Jumps on Confidence Budget Deficit will be Reduced

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India’s Rupee Jumps on Confidence Budget Deficit will be Reduced

The India’s rupee touched its strongest level in three weeks on bets the government’s attempts to reduce the budget deficit may spur global investors to buy more local assets.

The currency rose 0.1 percent to trade at 60.6200 per dollar, after earlier jumping to 60.5150, its highest level since July 31. The rupee had earlier declined 0.3 percent to 60.88. Last week, global funds bought a net $363 million of Indian bonds before markets were shut for public holidays on Aug. 15 and 18. This brought total inflows in the third quarter to $3.4 billion.

“The rupee gained mainly as there were inflows seen into local debt,” Vikas Babu, a Mumbai-based foreign-exchange trader at state-run Andhra Bank Ltd, told Bloomberg News. “The government’s efforts to cut the budget deficit are positive for the rupee.”

The yield on the 8.4 percent notes that mature in 2024 fell 0.05 percentage points or five basis points, to 8.48 percent. The one-month volatility of the rupee, which measures the anticipated swings in the exchange rate used to set prices to options, jumped 15 basis points to 7.17 percent.

Meanwhile, the South Korean won plunged by the biggest margin in two weeks after US housing starts in July beat expectations, supporting the dollar. The currency advanced 0.5 percent to trade at 1,022.68 per dollar in Seoul close, the biggest drop since Aug.6. It had earlier touched the highest level in one month of 1,015.59 on August 18.

The won’s one month implied volatility grew 28 basis points to 6.08 percent. Yield on 3.5 percent South Korean government bonds that mature in March 2024 fell 0.01 percentage point to 3.14 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com