India's rupee soars on foreign bond surge

Indian rupee climbs to six-month high, leading Asian currency rally

India’s rupee continues its impressive climb, reaching a six-month high as it leads Asia’s currency performance this year. Foreign investment in local bonds ahead of India’s global debt index inclusion is a key driver.

Indian rupee climbs to six-month high, leading Asian currency rally

India’s rupee has surged to a six-month peak, extending its impressive rally as Asia’s leading currency performer this year. This climb comes as foreign investors maintain their strong purchases of local bonds in anticipation of India’s upcoming inclusion in global debt indexes.

On Thursday, the currency rose by 0.1% to 82.7250 per dollar, marking its highest level since September 4. Analysts surveyed by Bloomberg predict that this upward trend will continue, with the rupee likely reaching 82.50 by the end of June.

Throughout this year, the rupee has demonstrated remarkable stability among emerging-market currencies, prompting speculation among traders that the central bank may have tapped into its substantial $619 billion foreign exchange reserves to steady the currency’s fluctuations. However, Australia & New Zealand Banking Group notes that these gains do not indicate a shift in the Reserve Bank of India’s (RBI) policy to prevent abrupt currency movements.


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Dhiraj Nim, economist, and forex strategist at Australia & New Zealand Banking Group in Mumbai, stated, “The RBI policy overall will not change, they would prevent any sharp moves in the rupee. If there is an appreciation pressure, they would absorb that money that flows in.”

Foreign inflows totaling $5 billion into rupee-denominated bonds have significantly contributed to the currency’s 0.5% increase this year, in anticipation of India’s upcoming addition to global debt benchmarks. Moreover, India’s bonds are under scrutiny for possible inclusion in FTSE Russell’s EM bond index, with a review scheduled at the end of the month.

Anindya Banerjee, currency analyst at Kotak Securities, highlighted a blend of factors propelling the rupee’s ascent: “corporate repatriation flows, heavy inflows in the debt market, and also weakness in the dollar.”


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