The Indian rupee rallied for eight days straight before suffering a 0.3% loss on Tuesday. The rupee weakened to 66.3950 per dollar in Mumbai, as importers purchased dollars at a cheaper price to pay end of the month bills.
The rupee rallied 1.4% over the last week, marking its strongest gains since 2011. The currency is up 0.4% in the month of December, and is the second-best performing currency in Asian markets this month. Analysts believe that inflows will follow the investment in the dollar and will be positive for the rupee in 2016.
India will also allow foreign investors to purchase 165 rupees starting on January 1. The announcement was made as part of the country’s September plan to increase limits in foreign purchases of sovereign in state government notes.
The yield on sovereign notes is currently 7.76% and is due on May 2025. Rising one basis point on Monday and two basis points last week, sovereign note yields are slowly increasing. The government plans to sell 140 billion rupees and notes on January 1 at an auction. The government last sold that on December 11 and raised more than 150 billion rupees as a result. There is a concern that a new 10-year benchmark bond is hurting sentiment in the market.