Rupee rallies with bonds as CPI eases

mumbai — India’s rupee and sovereign bonds climbed as slowing inflation added to optimism that policy makers will take steps to stem a rout in Asia’s worst-performing currency.

Consumer price growth eased below four per cent for the first time in 10 months, according to a report late Wednesday, which followed comments from an official that the government may announce support measures. Local markets were shut on Thursday for a holiday.

The rupee jumped 0.5 per cent to 71.8550 per dollar (19.57 against the UAE dirham), adding to Wednesday’s 0.7 per cent advance that was its largest since May 25. The yield on 10-year bonds dropped one basis point to 8.13 per cent, after falling five basis points on Wednesday. The key S&P BSE Sensex gauge of stocks climbed one per cent.

“The markets are on edge over potential measures to intervene in the rupee’s weakness,” said Sue Trinh, head of Asia foreignexchange strategy at Royal Bank of Canada in Hong Kong.

Decreasing pace of inflation is a welcome piece of news for the Reserve Bank of India, which is under duress to take stronger action to defend the rupee, after having already depleted billions of dollars of reserves in trying to do so. The rupee has continued to set one record low after another amid a broader emergingmarket meltdown. —