Bloomberg
Mumbai
India’s rupee climbed to a one-month high on optimism plunging prices of Brent crude will help cut the nation’s current-account deficit.
Goldman Sachs Group estimates the shortfall in the broadest measure of trade will be 1.1% of gross domestic product in the fiscal year ending March 2016, compared with 1.3% in the previous period, according to a report this month. Australia & New Zealand Banking Group and Morgan Stanley are among global banks predicting that the rupee will outperform its Asian peers in 2016.
“Oil prices at multi-year lows will help keep the deficit in check and that is a huge positive for the rupee,” said Gaurav Sharma, a senior currency analyst at Religare Commodities in Noida, near New Delhi. “Also, the Federal Reserve’s meeting is now behind us.”
The rupee strengthened for a fifth day, rising 0.1% to 66.3525 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It climbed to 66.2625 earlier, the highest level since Nov. 23. The currency has advanced 0.5% in December, paring its decline for 2015 to 5%.
Brent crude slumped to the lowest level since 2004 yesterday, lowering costs for India, which imports about three quarters of its oil.
The yield on sovereign bonds due May 2025 rose five basis points, the biggest increase since September 7, to 7.77%, according to prices from the Reserve Bank of India’s trading system. The yield rose on speculation the government may miss its budget deficit target of 3.5% of the GDP for the next fiscal year starting April 1, said Soumyajit Niyogi, interest rate strategist at SBI DFHI.
The government may have to reassess its budget deficit projections for the next fiscal year if growth slows, the Finance Ministry said in its mid-year review published on Friday.