Rupee Advances as India Inflows Resume With Brexit Brushed Off

(Bloomberg) -- India's rupee climbed to a two-week high as a pickup in foreign inflows lent credence to the view that Britain's vote to exit the European Union won't have a lasting effect on demand for local assets.

Overseas holdings of rupee debt increased by a net 10.5 billion rupees ($156 million) last week, the biggest jump since April, National Securities Depository Ltd. data show. They fell in the previous two weeks as investor anxiety around Brexit sapped appetite for emerging-market assets. Indian stocks surged to an eight-month high Monday as equity benchmarks gained across Asia amid expectations that global central banks will add to monetary stimulus to counter any contagion from Brexit.

The rupee rose 0.1 percent in a fourth day of gains to 67.2650 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It climbed to 67.15 earlier, the strongest level since June 17. The currency pared its advance as importers were seen buying dollars, according to Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd.

“Brexit has lowered the odds of an interest-rate increase by the Federal Reserve, which is another positive for the Indian currency,” said Samir Lodha, managing director at QuantArt Market Solutions Pvt. in Mumbai.

The rupee jumped 1 percent last week, the most since early March. It is down 1.7 percent this year. India's economy will be among the least impacted in Asia given its relatively low exposure to trade, Morgan Stanley economists wrote in a June 26 report. While Asia's third-largest economy isn't “insulated” from global events, it “has created good enough buffers to tackle to any volatility created by the global headwinds,” H.R. Khan, whose term as Reserve Bank of India's Deputy Governor ended Monday, said in an interview.

Sovereign bonds fell, with the yield on notes due January 2026 rising one basis point to 7.43 percent, prices from the central bank's trading system show. It dropped six basis points last week, the most since mid-March.

The S&P BSE Sensex index of shares climbed 0.5 percent in a sixth day of gains. Global funds bought a net $159.7 million of Indian stocks last week after being sellers in the prior five-day period, data compiled by Bloomberg show.

To contact the reporter on this story: Nupur Acharya in Mumbai at nacharya7@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Shikhar Balwani