Rupee Surges the Most in Nearly Two Months on Investor Optimism

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Rupee Surges the Most in Nearly Two Months on Investor Optimism The Indian rupee posted its largest weekly advance in nearly two months as investors expressed confidence that the government will roll out policies that will turn around the ailing economy when it announces its budget on July 10.

The rupee advanced 0.6 percent over the week to trade at 59.735 per dollar in Mumbai close. This is the biggest advance since the weekly session through May 16.

“Expectation of a growth-friendly budget is driving the rupee,” Gaurav Sharma, a New Delhi-based senior currency analyst at Religare Commodities Ltd spoke to Bloomberg. “Markets will continue to trade higher if the government continues with is reforms agenda.”

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Global funds have invested in a net $20 billion worth of Indian stocks and bonds in 2014, the largest inflow in Asia. Investor appetite for the rupee has grown after India reduced inflation and current-account shortfall and on speculation that the new government may unveil measures aimed at spurring growth.

The new government, led by Prime Minister Narendra Modi, recently hiked train fares and cargo charges and fuel prices in order to increase revenue and reduce its expenditure on fuel subsidies. The country’s economy expanded by 4.7 percent in the 12 months ending March, near the 4.5 percent growth rate recorded a year earlier that was the weakest in a decade.

The rupee’s one-year implied volatility has declined 422 basis points since the start of January to 9.12 percent as of June 27, the lowest since June 2011. It remained slightly steady this weekly session at 9.23 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