Thursday, November 5, 2009

Indian Rupee Strengthens a Second Day as Stock Index Climbs

Nov. 5 (Bloomberg) -- India’s rupee strengthened for a second day as stock gains added to optimism foreigners are increasing purchases of the nation’s assets to gain from its relatively fast economic growth.

The currency advanced to its strongest level this week after the Bombay Stock Exchange’s benchmark Sensitive Index climbed 1 percent, extending yesterday’s 3.3 percent gain. Overseas funds added to their holdings of Indian shares in each of the last eight weeks, taking net purchases for the year to $14.2 billion on Nov. 3.

“The rupee strengthened later in the day following gains in the stock market,” which spurred speculation that capital inflows will increase, said Sanjay Arya, a treasurer at state- owned Bank of Maharashtra in Mumbai.

The rupee rose 0.1 percent to 47.025 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. That increased the currency’s gains this year to 3.7 percent, the fourth-best performance among Asian currencies.

Offshore contracts indicate bets the rupee will trade at 47.06 to the dollar in a month, compared with expectations of 47.11 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

Crude Oil

The currency fell earlier on speculation the nation’s refiners increased dollar purchases to pay for costlier crude- oil imports. Oil prices in New York have gained almost 4 percent this week, extending October’s 9 percent advance, which was the biggest since May. India imports more than three-quarters of the oil it uses.

The rupee opened weaker “as oil steadily advances, adding pressure on India’s trade deficit to widen,” said Vikas Babu, a trader at state-owned Andhra Bank in Mumbai.

Crude oil has advanced more than 79 percent this year, boosting India’s oil import costs to a 10-month high of $6.34 billion in September. India’s trade shortfall increased to $7.8 billion in September, from $2.2 billion in February, government data show.

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