India’s foreign-exchange reserves climbed to a record as the rupee heads for its biggest monthly advance in two years.
The currency stockpile rose by $2.54 billion in the week through March 18 to an unprecedented $355.95 billion, a Reserve Bank of India statement showed Friday. That capped a third straight week of increases. The rupee has jumped 2.6 percent in March as India’s government stuck to its fiscal goals in last month’s budget and investor sentiment toward emerging markets improved amid efforts by global central banks to support growth. That’s helped pare the Indian currency’s 2016 drop to 0.8 percent, Asia’s worst performance.
The rise in reserves provides RBI Governor Raghuram Rajan more ammunition to shield the region’s third-largest economy from capital outflows amid the possibility of further interest-rate increases by the Federal Reserve and any risks from the slowdown in China. A gauge of the rupee’s expected price swings has dropped 68 basis points this month and Edelweiss Financial Services Ltd. says a stable currency will aid central bank efforts to control inflation and give it more room to lower borrowing costs.
“With record reserves in hand, the RBI is in a much more comfortable position to counter any bouts of volatility,” said Ankur Jhaveri, co-head of currencies and rates at Edelweiss Financial in Mumbai. The central bank will cut the benchmark repurchase rate by 25 basis points at its April 5 meeting, he said.
The rupee fell 0.1 percent from March 23 to 66.6950 a dollar as of 12:20 p.m. in Mumbai, according to prices from local banks compiled by Bloomberg. Indian markets were shut Thursday and Friday for public holidays.
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The currency sank to an all-time low of 68.845 in August 2013 after the Fed’s signal to withdraw monetary stimulus led to an exodus of foreign funds from emerging markets. It has since rebounded 3.2 percent. India’s foreign-exchange reserves surpassed a previous all-time high seen in June 2015 and have jumped about 29 percent since Rajan took charge at the central bank in September 2013.
Indian sovereign bonds were steady on Monday, with the yield on notes due January 2026 at 7.50 percent, according to prices from the RBI’s trading system.
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