The Indian rupee rallied to its highest level in eight months after data indicated capital inflows rose, while the central bank maintained the borrowing rates.
The rupee was up 0.4 percent from its Friday’s close to trade at 59.68 at 10.27 a.m. in Mumbai. It rose as much as 59.61 a dollar, its highest level since July. The currency has so far advanced 3.2 percent in the three months to March, its best performance in 2 years. The advance was attributed into foreign investments totalling $9.3 billion in local bonds and shares.
The Indian foreign exchange market was closed on Monday as March 31 was a local holiday, while banks closed their accounts yesterday after their fiscal years ended. The Reserve Bank of Indian maintained its repurchase rate of 8 percent following a decline in consumer-price inflation.
“We are seeing continued foreign inflows in Indian markets, which are pushing the rupee higher,” Naveen Raghuvanshi, a Mumbai-based dealer at DCB Bank Ltd told Bloomberg. “There was no surprise from the RBI’s monetary policy review yesterday and dovish comments from the U.S. Federal Reserve are also boosting the currency.”
Matters were further helped by Federal Reserve Chair Janet Yellen’s comments that the U.S. monetary stimulus programme will be extended for some time. India’s 10-year sovereign bond has a yield of 8.91 percent, the most of all investment-grade Asian economies. This is in contrast to the U.S. Treasuries’ yield of 2.76 percent.
Consumer prices in India rose 8.1 percent on a year-on-year basis in February, the lowest percentage increase since January 2012.
The rupee’s one-month implied volatility, which measures expected fluctuations in the exchange rate used to assign prices to options, plunged 0.13 percentage points, or 13 basis points, to 8.83 percent.
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