India’s rupee rose from a 13-month low on speculation the government will ease curbs on foreign- currency borrowings by companies, allowing more capital inflows.
The currency ended four days of losses after the Economic Times newspaper reported India will make it easier for domestic companies to borrow cheaper funds abroad after industrial production expanded at the slowest pace in six years in March. India imposed limits on such borrowings last year to slow capital inflows that helped the rupee reach an almost a decade high, threatening to erode export earnings.
``The rupee should halt its decline around current levels as the market waits for government measures that may boost capital flows,’’ said Mohan Shenoi, treasurer at Kotak Mahindra Bank Ltd. in Mumbai. ``It is expected that the government is going to review restrictions on external commercial borrowings.’’
The rupee rose as much as 0.4 percent to 42.555 per dollar, before trading at 42.6025 as of 11:13 a.m. in Mumbai, according to data compiled by Bloomberg, the most since May 1998. The currency is the third-worst performer among the most-traded Asian currencies this year with a 7.5 percent loss.
India can ease restrictions on overseas borrowings among other measures to ensure stability of the financial system, the Hindu newspaper reported May 3, citing central bank Governor Yaga Venugopal Reddy.
Indian companies borrowing more than $20 million overseas can’t repatriate the proceeds, while they need the central bank’s permission to bring back funds up to $20 million, according to current government regulations.
The annual pace of growth in India’s industrial production more than halved to 3 percent in March from 8.6 percent in the previous month. The gain was the smallest since February 2002.
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