India’s Rupee Surges on U.S. Interest Rate Speculation

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India’s Rupee Surges on U.S. Interest Rate SpeculationThe Indian rupee advanced at the fastest pace in nearly pace in nearly two months on bets the Federal Reserve may not hike interest rates soon, boosting inflows to the Asian country’s assets.

The rupee surged 0.6 percent to trade at 61.0550 per dollar, the fastest advance since Aug. 14. The currency has gained 1.2 percent so far in the fourth quarter. The currency’s one-month implied volatility, which measures the expected swings in the exchange rate used to set prices to options, plunged 19 basis points to 6.52 percent.

The yield on the nation’s 10-year government bonds stood at 8.47 percent, more than 2.32 percent for similar U.S. securities.

The minutes of the Federal Open Market Committee’s September gathering that were published on Wednesday indicated that policy makers were worried about the impact of a stronger dollar and a global economic slowdown on the U.S. economic growth.

“The primary driver of the rupee’s strength are the FOMC comments that have eased concerns about higher U.S. rates,” Anindya Banerjee, a Mumbai-based currency analyst at Kotak Securities Ltd., told Bloomberg News. “The Fed’s comments provide a great comfort to emerging markets, including India, as market participants don’t want rates to go up on liquidity concerns.”

Meanwhile, the Malaysian ringgit rose the fastest in six months on bets the Fed will postpone hiking borrowing costs and that the nation’s budget will set the pace for fiscal improvement.

The ringgit jumped 0.9 percent to trade at 3.2438 per dollar, the most since April 8. The currency touched its highest level in two weeks of 3.2330. The ringgit’s one-month implied volatility dropped 0.34 percentage point, or 34 basis points, to 7.06 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