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India’s Rupee Heads for a Fourth Weekly Advance After Rate Cut

India’s rupee headed for a fourth weekly gain on optimism capital inflows will quicken after the central bank cut interest rates for the first time since April to support the economy.

The Reserve Bank of India lowered its benchmark repurchase rate to 7.75 percent from 8 percent on Jan. 29 and said cooling inflation will give some room to ease policy further. Global funds poured $571 million into Indian shares in the first three days of this week, exchange data show. The rupee also gained as exporters repatriated overseas earnings, according to FirstRand Ltd. (FSR), taking advantage of a more favorable exchange rate after the local currency lost 7.6 percent in the past year.

“Inflows and the rupee’s gains are sentiment-driven after the recent policy actions,” said Harihar Krishnamoorthy, Mumbai-based treasurer at the Indian unit of FirstRand. “Current levels are appropriate for the currency and will also be supportive for exporters.”

The rupee advanced 0.7 percent this week to 53.2975 per dollar as of 10:27 a.m. in Mumbai, according to data compiled by Bloomberg. It fell 0.1 percent today. The currency, which rose 3.3 percent last month in the best rally since September, touched 53.0650 yesterday, the strongest level since Oct. 18.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, climbed four basis points, or 0.04 percentage point, this week to 9.84 percent. The rate rose two basis points today.

Three-month onshore rupee forwards traded at 54.30 per dollar, compared with 54.21 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.13 versus 53.98. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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