India’s rupee climbed for a fourth day as a rally in Asian stocks added to speculation U.S. interest rates at a record low will fuel demand for higher- yielding assets.
The currency traded at a five-week high after the U.S. Federal Reserve cut its benchmark interest rate to as little as zero this week. Average daily purchases of Indian shares this month by overseas investors exceeded sales for the first time since April, data from the nation’s capital markets regulator showed. Nine of the 10 most-active Asian currencies outside Japan rose.
“The rupee is stronger, tracking the trend across Asian currency and equity markets,” said Vikas Babu, a trader at state-owned Andhra Bank in Mumbai. “The dollar carry trade is making a comeback now that Fed has cut rates really low.”
The rupee climbed as much as 0.8 percent to 47.295 per dollar before trading at 47.355 as of 10:03 a.m. in Mumbai, according to data compiled by Bloomberg. It may rise to 46.5 in the coming weeks, Babu said.
The rupee has rebounded almost 7 percent from a record low of 50.615 touched on Dec. 2. The currency’s 16.7 percent loss this year is still the biggest since 1991, when a balance of payments crisis forced India to pawn its gold with the International Monetary Fund to pay for imports.
Asian stocks rose for a second day after the Fed said on Dec. 16 it will use “all available tools” to help resume growth in the world’s biggest economy. The Fed said it will target a federal funds rate of between zero and 0.25 percent. The Reserve Bank of India’s benchmark overnight lending rate is 6.5 percent.
The MSCI Asia Pacific Index of regional shares climbed 9.5 percent in December, headed for its biggest monthly gain since June 1999. The last time the index ended a month higher was in April this year.
Source : Bloomberg.com