India Rupee Completes Best Week in 12 Years as Investors Return
By Anoop Agrawal and Anil Varma
Nov. 7 (Bloomberg) -- India's rupee completed its best week in more than 12 years on optimism falling borrowing costs worldwide will boost investor demand for emerging-market assets.
The currency extended last week's gains as central banks in the U.K., Europe, Australia, South Korea and India added to last month's interest-rate cuts, helping global stocks rebound. Overseas funds bought $543 million more Indian shares than they sold in the four trading days through Nov. 4, according to data released by the nation's capital markets regulator.
``The outlook for equities is much better than what it was at the peak of the global credit crisis,'' said K.V. Mallik, treasurer at state-owned UCO Bank in Kolkata. ``The climate for investments will improve soon and will help the rupee.''
The rupee climbed 3.8 percent this week to 47.66 a dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. That is the biggest weekly gain since March 1996, making it the best performer among Asia's 10 most-active currencies outside Japan.
The Bank of England cut its key rate yesterday to 3 percent, the lowest level since 1955. The 1.5 percentage-point reduction was the biggest in 16 years. The European Central Bank followed with its second half-point cut in a month. The action in Europe followed decisions last week by the Federal Reserve and Bank of Japan to lower rates.
Rates, Stocks
Bank of Korea dropped its benchmark today for a third time in a month. Australia's central bank cut rates on Nov. 4, the third reduction in as many months. The Reserve Bank of India cut interest rates for the second time in two weeks on Nov. 1.
The Bombay Stock Exchange Sensitive Index has rebounded 17 percent since Oct. 27, according to data compiled by Bloomberg. The index added 2.4 percent today. The value of equities worldwide recovered to $31.8 trillion on Nov. 6, from $29.4 trillion, the lowest since 2003, reached on Oct. 27, Bloomberg data show.
Offshore forward contracts show traders have pared bets for how much they predict the rupee will depreciate over the next month, showing an implied rate of 48.09 a dollar compared with 48.30 yesterday.
Forwards are agreements in which assets are bought and sold at current prices for future delivery. Indian rupee forwards traded overseas are non-deliverable, meaning they are settled in dollars rather than the local currency.