MUMBAI (Commodity Online): The Indian rupee was an outperformer among emerging-market currencies Friday, rising 1.5% against the U.S. dollar, said Brown Brothers Harriman in a research note.
“First, from a technical perspective, USD/INR finally made a clean break below the 50 level for the first time since last November. Second, flows into equity and bond markets have been very supportive during this period of risk appetite, and helped by prospects of rate cuts by the RBI (Reserve Bank of India),” BBH added.
According to BBH, So far in 2012, foreigners have invested $1.56 billion in Indian equities and bought $3.39 billion worth of debt.
“Lastly, a central bank source allegedly told Reuters that the RBI may intervene in the forward market in addition to its now regular spot interventions. With all this in mind, it is clear to us that any sharp upwards move in USD/INR will be met by strong headwinds from officials, but we are not convinced that the currency will continue to outperform the region for much longer,” BBH said.
The performance of the rupee is monitored by metals traders, since it can influence demand for gold from a country that long has been one of the world’s largest consumers of the metal.
