Rising rates may help reinforce the positive sentiment on India among overseas investors, said Roy Paul, deputy general manager at Federal Bank. The rupee is stronger as capital inflows remain healthy.
The currency appreciated 0.8%, the most since June 21, to 46.665 per dollar. That pared the currencys losses this month to 0.4%, still the worst performance among Asian currencies.
Offshore forward contracts indicated the rupee will trade at 47.19 to the dollar in three months, compared with expectations for a rate of 47.60 on Monday. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.
The rupee also advanced after Moodys Investors Service upgraded Indias local-currency debt rating to Ba1 yesterday, the highest non-investment category. That was the first increase since 1998.
Overseas holdings of the nations stocks and bonds touched all-time highs of $81.8 billion and $15.4 billion, respectively, this month, according to data from the Sebi.