India’s rupee rose to a one-week high on speculation a rebound in the nation’s benchmark stock index will lure overseas investors as Europe takes steps to resolve its debt crisis.
The BSE Sensitive Index of shares climbed 3.3 percent after European Central Bank President Jean-Claude Trichet said yesterday the monetary authority would reintroduce purchases of covered bonds and offer loans to banks. Falling demand for the dollar also aided gains in the rupee, said Vikas Babu, a currency trader in Mumbai at Andhra Bank.
“The Sensex started positive and supported the rupee on expectations of capital inflows,” said Babu. “The dollar had also been overbought as investors avoided assets from countries like India because of worries about Europe.”
The rupee strengthened 0.5 percent to 49.0888 per dollar as of 10:34 a.m. in Mumbai, according to data compiled by Bloomberg. It earlier touched 48.9950, its highest level since Sept. 29. The currency declined 0.2 percent for the week. India’s markets were shut yesterday for a public holiday.
The Dollar Index, which tracks the currency’s performance against six major trading partners, declined for a third day.
Offshore forwards indicate the rupee will trade at 49.64 to the dollar in three months, compared with expectations of 49.88 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
