The India’s rupee rallied the most in over a week while government bonds advanced after the improved monsoon rains eased inflation concerns.
The rupee was up 0.2 percent to trade at 60.1050 per dollar at the close of trade in Mumbai, its biggest increase since July 11. Data seen on the Reserve Bank of India trading platform indicated that yield on the 8.83 percent government notes that mature in November 2023 plunged three basis points to close at 8.66 percent, the lowest level since July 3.
The shortfall in the June-September monsoon rains, which contribute over 70 percent of the country’s annual rains, shrunk to 27 percent of the 50-year average, reported the weather department on Tuesday. The deficit stood at 43 percent on July 11.
“A revival in monsoon rains would be seen as a positive,” Anindya Banerjee, a Mumbai-based currency analyst at Kotak Securities Ltd., told Bloomberg. “The rupee is likely to remain range-bound as the RBI seeks to keep the currency stable.”
The rupee was also helped by increased foreign inflows. Foreign investors have invested over $4 billion in the country’s stocks and bonds in July after the new government rolled out measures to reduce the budget shortfall and promote foreign investor interest in industries.
The rupee’s one-month implied volatility, which measures the expected swings in the exchange rate used to assign price to options, declined 0.36 percentage point or 36 basis points, to 5.88 percent in Mumbai trading.
The rupee’s 3-month offshore non-deliverable forwards, which are usually settled in dollars, appreciated 0.4 percent to close at 60.76 per dollar. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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