Rupee gains most in a month; bonds fall for third day

Written by Bloomberg | Updated: Aug 30 2011, 06:15am hrs
The rupee gained the most in almost a month on speculation global funds will buy emerging- market assets after the Federal Reserve said it has the tools to support growth in the US economy.

The rupee and the Bombay Stock Exchanges Sensitive Index rose for the first time in four days. Fed chairman Ben S. Bernanke told a gathering of central bankers in Jackson Hole, Wyoming, on August 26 that the worlds largest economy is recovering and the central bank still has a range of measures it could use to help the nation.Bernankes statement has been interpreted as an assurance that the Fed will maintain adequate liquidity in the US market and this has improved appetite for Indian assets, said Sudarshan Bhatt, chief currency trader in Mumbai at state-owned Corporation Bank. The Indian stock market is also oversold after falling for most of last week. The rupee rose 0.2%to 46.05 per dollar at close in Mumbai, according to data compiled by Bloomberg, the biggest advance since Aug. 1.

Offshore forwards indicate the Indian currency will trade at 46.46 to the dollar in three months, compared with expectations of 46.59 on August 26. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The countrys 10-year bonds dropped for a third day on speculation the central bank will boost borrowing costs for the sixth time this year to curb inflation.