India’s Rupee Rises to Two-Week High After Exports, Output Climb

India’s rupee advanced to the highest level this month after reports showed exports rose the most in a year and factory output beat estimates.

Overseas sales climbed 4.2 percent in February from a year earlier, helping narrow the trade deficit to $14.9 billion from $20 billion, official data showed March 11. Industrial production increased 2.4 percent in January, a report showed yesterday, compared with the 1.3 percent gain forecast in a Bloomberg survey of economists. The rupee’s advance will be limited by questions on policy makers’ ability to revive annual growth from the least in a decade, according to Barclays Plc.

“The recent rupee strengthening is largely due to the better-than-expected data,” said Nick Verdi, a strategist at Barclays in Singapore. “The trajectory of the currency will depend on the central bank’s room to cut rates going ahead and the ability of the government to raise revenue from untested streams. I would struggle to get too excited on the rupee.”

The rupee advanced 0.1 percent to 54.1325 per dollar as of 10:16 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 54.0175, the strongest level since Feb. 28. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell one basis point, or 0.01 percentage point, to 8.99 percent.

Consumer prices rose 10.91 percent last month, compared with a 10.79 percent increase in January, official data showed yesterday, even as wholesale-price inflation is seen easing to the slowest pace since 2009. Wholesale prices increased 6.6 percent in February, according to the median of 28 estimates in a Bloomberg survey before data due tomorrow.

Going Neutral

In the budget announced on Feb. 28, Finance Minister Palaniappan Chidambaram raised spending on the poor to court support before elections, relying on higher taxes, including a surcharge on wealthy individuals, asset sales and subsidy cuts to trim the widest fiscal deficit in major emerging nations.

The budget “underwhelmed and disappointed” Brown Brothers Harriman Ltd., which is going ‘neutral’ on the rupee from ‘positive’ last month. The timing of further interest-rate reductions from the Reserve Bank of India is now more uncertain, according to Brown Brothers and Barclays.

“There are no overwhelming reasons to be long on the rupee, and it is not one of our favorite currencies in the region,” Barclays’ Verdi said.

Three-month onshore rupee forwards traded at 55.26 per dollar, compared with 55.39 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.20 versus 55.18. 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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