(MENAFN- Gulf Times) India's rupee is the best-performing Asian currency in January on optimism the nation's improving economic outlook will attract more global funds.
The International Monetary Fund said in January that India is poised to become the world's fastest-growing major economy in the year to March 2017. Overseas investors, who net bought a record $42bn of stocks and bonds last year, have added another $5.4bn to their holdings in 2015, the latest exchange data show. India's central bank cut interest rates in an unscheduled move on January 15 as plunging oil prices helped slow consumer inflation. Bonds rallied for a fifth month.
"India remains a favoured destination for foreign investors," said NS Venkatesh, the Mumbai-based head of treasury at IDBI Bank. "With inflation under control, the current account possibly turning a surplus and economic growth poised to accelerate, we'll continue to see inflows." The rupee climbed 1.9% this month to close at 61.8725 a dollar in Mumbai, the biggest monthly advance since May, prices from local banks compiled by Bloomberg show. A 56% slump in Brent crude since end-June helped restrict consumer-price gains below the Reserve Bank of India's 6% target for a third month in December, prompting the first interest-rate cut since May 2013. Morgan Stanley predicts India will swing to a current-account surplus of $1.5bn in the fiscal year starting in April, spurred by the drop in oil and policy makers' efforts to curb gold imports. Asia's third- largest economy imports about 80% of its oil.
RBI Governor Raghuram Rajan next reviews monetary policy today, when he is seen leaving the benchmark repurchase rate at 7.75% by 27 of 35 economists surveyed by Bloomberg News.
The rest see a cut to 7.50%.
Three-month offshore non-deliverable rupee forwards rose 2.1% this month to 62.84 a dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
The yield on the local sovereign bonds due July 2024 fell for a fifth month in January, dropping 16 basis points, or 0.16 percentage point, to 7.69%, according to prices from the RBI's trading system.
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