Rupee and bonds gain as Govt hikes FII cap in debt

The Indian rupee rose to its highest level in more than four months against the US dollar on Friday and benchmark bond prices gained after the foreign investment ceiling in government and corporate bonds was increased by US$5bn each. The local currency also got support from another strong day for the local stock market and registered its fourth straight weekly gain.



The partially convertible rupee gained nearly 1% today to end at the day's high of 45.25/26, after hitting a low of 45.6050. It had opened at 45.59 versus Thursday's close of 45.65/66. The currency touched the strongest level since May 14. It had closed at 45.84 on Sept. 17. The yield on the benchmark 7.8% government bond due in May 2020 fell by two basis points to 7.87%, according to the RBI's trading system. The price rose by 16 paise, per Rs100 face value, to Rs99.51.

The Union Finance Ministry on Thursday increased the cap on foreign investment in government and corporate bonds by US$5bn each to US$10bn and US$20bn, respectively. The Government's move will help increase foreign capital inflows and offset India’s current-account deficit, which widened to US$13bn in the first quarter from US$12.2bn in the preceding three months.

In overseas markets, the yen slipped against most of its big rivals on renewed talk that the Japanese government intervened to check the currency's rise as it looks to support its sluggish economy and protect exporters. The currency slid as much as 1.1 percent against the dollar in the biggest intraday decline since Japan intervened on Sept. 15 before erasing its drop.

The euro advanced against the dollar after a report showed German business confidence unexpectedly rose to the highest level in more than three years. The Swiss franc gained as much as 0.7 percent to 97.86 centimes per dollar, matching the strongest since the beginning of data in 1971. The Swiss currency was later at 98.83 centimes

The dollar index, which tracks the US currency against its top six rivals, was down 0.57% at 79.66 after being as high as 80.26 and as low as 79.60.