Rupee climbs as stocks extend gains

The Indian rupee rallied amid expectations that global investors will pour more money into high-yielding assets like emerging market equity after US interest rates fell as low as zero. The sharper than expected drop in inflation fueled speculation that the RBI will cut rates further to revive economic growth. The partially convertible Indian rupee closed the week at 47.26 per dollar, rising 2.8% during the week, the best performance since the week through Nov. 7. It touched a weekly high of 46.85 and a low of 48.17. The currency rose for a third successive week as global stocks have rallied on hope that rate cuts and stimulus packages will bolster the global economy. The rupee is up nearly 7% from a record low of 50.6150 touched on Dec. 2. The currency’s 16.5% loss this year is still the biggest since 1991.

The Indian currency extended gains this week after the Federal Reserve cut its benchmark interest rate to as little as zero this week and said it will use all available tools to help resume growth in the world’s biggest economy. The Fed said it will target a federal funds rate of between zero and 0.25%. The benchmark BSE Sensex gained 4.2% this week, adding to last week’s 8.1% advance. Offshore non-deliverable forward contracts showed traders scaled back bets for how far the currency will fall in a month. The contracts indicate the rupee will trade at 47.65 a dollar in a month, compared with expectations for a decline to 51.26 at the end of November.