The Indian currency strengthened 1.4 % to 44.86 per dollar on Monday, the biggest gain since March 19, 2009. It rose as high as 44.825 earlier. The rupee also appreciated 0.3 % against the euro to 58.138.
The rupee jumped the most in 14 months as policy makers in Europe pledged almost $1 trillion in loans to ease a debt crisis, encouraging investors to return to emerging-market assets.
The currency rose for the first time in six days as stocks and currencies rallied across Asia. Investors should buy the rupee against the dollar and the euro using non-deliverable forward contracts that mature in three months to gain from India?s improving economy, foreign-exchange strategists at Standard Chartered Plc wrote in a research note on Monday.
India?s economic growth ?is second only to China?s in Asia and should continue to attract capital inflows,? wrote Priyanka Chakravarty and Thomas Harr as Standard Chartered based in Mumbai and Singapore, respectively. ?The rupee is likely to benefit from the European Union?s emergency fund.?
Offshore forwards signaled traders pared bets for the rupee?s weakness. The contracts signal the currency will trade at 45.06 to the dollar in three months, compared with expectations of 45.78 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.
The yield on the benchmark 7.80 % note due May 2020 rose two basis points to 7.68 %. India?s 10-year bonds fell, pushing yields to their highest level in almost a week, on speculation investors will favour assets offering better returns than government debt as a crisis eases in Europe.
The MSCI Asia-Pacific Index of regional shares and the Mumbai Stock Exchange Sensitive Index both rose for the first time in six days after European leaders unveiled a loan package worth almost $1 trillion to head off the risk of default among the 16 nations using the euro. RBI?s plan to sell Rs 12,000 crore ($2.6 billion) of bonds this week also damped appetite for the nation?s debt.