India’s Rupee Halts Five-Week Decline on Central Bank Measures

India’s rupee halted a five-week decline as the central bank took steps to boost the supply of dollars and stem Asia’s worst exchange-rate loss this quarter.

The Reserve Bank of India yesterday cut the amount of overseas income companies can hold in foreign currency to 50 percent from 100 percent, forcing them to convert earnings. On May 4, the monetary authority raised interest rates on non-rupee deposits by as much as 300 basis points and freed up borrowing costs on foreign-exchange loans to exporters.

“The easier norms for capital inflows, particularly deposits and foreign borrowings, by the RBI” will help improve dollar supply, Tushar Poddar and Vishal Vaibhaw, analysts in Mumbai at Goldman Sachs Group Inc., wrote in a report today. “Overall, we have taken a sanguine view of limited rupee depreciation.”

The rupee was little changed this week at 53.4850 per dollar as of 9:37 a.m. in Mumbai, according to data compiled by Bloomberg. The currency, which has lost 4.9 percent this quarter, declined 0.2 percent today.

The rupee’s one-month implied volatility, a measure of exchange-rate swings used to price options, fell four basis points, or 0.04 percentage point, to 11.66 percent.

Six-month onshore currency forwards were trading at 55.08 a dollar, compared with 55.05 yesterday, and offshore non- deliverable contracts were at 55.29 from 55.25. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.

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