Rupee rebounds, thanks to new central banker
RESERVE Bank of India (RBI) governor Raghuram Rajan has turned the rupee from a pariah into the world's favourite currency after just a month in office, as he intensifies efforts to quell inflation and woo capital.
Investors selling United States dollars to buy rupees have earned 10 per cent since Mr Rajan took over on Sept 4, the most among 44 currencies tracked by Bloomberg, and a turnaround from a 2.8 per cent third-quarter loss.
"We no longer have a crisis of confidence," Mr Geoffrey Kendrick, the Hong Kong-based head of Asian currency and rates strategy at Morgan Stanley, said on Monday. "The new RBI governor has market credibility. For now, he's saying all the right things."
The rupee sank to an all-time low in August after India's current-account deficit grew to a record US$88 billion (S$109 billion) in the fiscal year ended in March this year, threatening to push up inflation in a nation that imports 80 per cent of its oil.
Mr Rajan, 50, has pledged to do whatever it takes to stabilise the rupee. Among his first acts, he unexpectedly raised the benchmark interest rate by a quarter point to 7.5 per cent last month.
The rate change helped drive the rupee to 61.545 (S$1.24) per US dollar on Monday in Mumbai, a 12 per cent advance from the all-time low of 68.845 on Aug 28.
Deutsche Bank and Citigroup, the world's two biggest foreign-exchange traders, recommend buying the rupee in the forwards market and selling the Singapore dollar.