R rises on hope of current account gap narrowing

Written by Bloomberg | Updated: Mar 30 2011, 06:14am hrs
The Indian currency strengthened for the seventh day in eight on optimism export growth will help narrow the nations current account deficit.

A central bank report this week will show the shortfall narrowed to $9.15 billion in the fourth quarter from $15.8 billion in the previous three months, according to the median estimate of economists in a Bloomberg survey. Overseas shipments rose 32.4% in February from a year earlier. The BSEs Sensitive Index advanced for a sixth day.

The rupee is maintaining its underlying bias to appreciate as the impressive growth in exports will surely help improve the current-account balance, said Sudarshan Bhatt, chief currency trader at Corporation Bank in Mumbai. The rupee climbed 0.1% to 44.78 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency touched 44.61 on March 25, the strongest level since January 4. The Indian currency also gained on speculation overseas borrowings by local companies will boost the supply of the dollar in the local foreign-exchange market.

Offshore forwards indicate the rupee will trade at 45.59 in three months, compared with expectations of 45.64 Monday.

The yield rose to 454 basis points more than similar-maturity Treasuries from a low of 439 on March 3. Indian bonds returned 2% this year, the best performance among 10 local-currency debt markets in the region, HSBC Holdings Asia bond indexes show.