Indian Rupee Rises to 3-Week High as Fed Plan Helps Draw Funds

By Anil Varma

March 19 (Bloomberg) -- India’s rupee climbed to a three- week high on speculation the U.S. Federal Reserve’s plan to buy $1 trillion of bonds will drive interest rates lower, boosting demand for higher-yielding assets.

The currency strengthened versus the dollar and the Mumbai Stock Exchange Sensitive Index was headed for its first close above 9,000 in a month. Overseas investors bought Indian shares worth $110 million more than they sold on March 17, the most in more than three months, according to the latest data from the Securities and Exchange Board of India.

“The rupee’s bias is clearly upward,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Markets are rallying globally, showing the Fed’s bond purchase announcement has boosted investor confidence.”

The rupee rose 0.8 percent to 50.90 per dollar as of 10:04 a.m. in Mumbai, according to data compiled by Bloomberg. It earlier touched 50.8650, the highest since Feb. 26. The currency has rebounded 2.5 percent since reaching a record low of 52.1850 on March 3 and Bhatt forecast it may climb to 50.70 this week.

The MSCI Asia-Pacific Index of regional shares advanced 1.8 percent after the U.S. Standard & Poor’s 500 Index added 2.1 percent. The Sensitive Index, or Sensex, rose 1 percent to 9,066.08.

Offshore contracts indicate traders bet the rupee will trade at 51.25 per dollar in a month, compared with expectations of 51.67 yesterday. 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.

To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.