India’s rupee rose 6.1% in the past four days, the biggest gain since at least 1973, as U.S. jobs data that fell short of estimates tempered concern the Federal Reserve will cut stimulus this month.
Non-farm payrolls in the U.S. climbed 169,000 in August, official data showed Sept. 6, trailing the 180,000 median estimate in a Bloomberg survey. Indian markets were shut yesterday for a local holiday. The Reserve Bank of India last week announced a plan to provide concessional swaps for banks’ foreign-currency deposits to boost the supply of dollars.
The rupee gained 2.2% from Sept. 6 to 63.84 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It strengthened past 64 for the first time since Aug. 26 to as high as 63.765. The currency, which touched an all-time low of 68.845 on Aug. 28, advanced 6.1% in the four trading days through today, the biggest gain in data compiled by Bloomberg going back to 1973.
“The rupee’s move is due to the positive sentiment generated after the payrolls data and the measures taken by the RBI,” said Ashtosh Raina, head of foreign-exchange trading at HDFC Bank Ltd. in Mumbai. The currency could strengthen to around 63 per dollar before resuming its drop because of India’s weak economic fundamentals, he said.
The S&P BSE Sensex rose 3.8% to 19,997.10 today, the biggest gain since May 2009. The yield on the benchmark 10-year government bond fell 16 basis points to 8.47%.
India’s trade deficit narrowed to $10.9 billion in August from $14.2 billion a year ago, a government report showed today. Total imports fell 0.7% to $37.1 billion even as oil shipments surged 18% to $15.1 billion. Exports rose 13%. China’s exports rose 7.2% last month from a year earlier, the General Administration of Customs said Sept. 8. That exceeded the 5.5% median estimate of analysts.
Global funds have cut holdings of Indian debt by $10.2 billion since May 22, when Fed Chairman Ben S. Bernanke first flagged a potential paring of stimulus, leaving the rupee vulnerable to the nation’s current-account deficit. The shortfall in the broadest measure of trade widened to a record 4.8% of gross domestic product in the year ended March 31 as growth eased to 5%, the slowest pace in a decade.
“An environment of better global growth and weak domestic demand should correct the current-account deficit this fiscal year,” Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai, wrote in a research report today. “We expect financing of the deficit to remain difficult.”
The Fed has said the jobs market needs to show signs of improvement to warrant any trimming of asset purchases as policy makers prepare to meet Sept. 17-18 to review the plan. Raghuram Rajan, who took charge as RBI governor on Sept. 4, announced the same day that he has postponed the Indian central bank’s meeting to Sept. 20 from Sept. 18 to give him “enough time to consider all major developments in the required detail.”
One-month implied volatility in the rupee, a measure of expected moves in the exchange rate used to price options, fell 199 basis points, or 1.99 percentage point, to 18.03%.
Three-month onshore rupee forwards rose 1.8% from Sept. 6 to 65.59 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts climbed 1.1% to 65.95. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.