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Rupee Advances on Current-Account Optimism Before Trade Policy

India’s rupee rose toward a seven- week high on optimism falling oil and gold prices will help narrow a record current-account deficit.

Brent crude has slipped 11 percent this month, according to data compiled by Bloomberg, and that will help cut imports in a nation that gets about 80 percent of its oil from abroad. The price of gold, which the central bank estimates accounts for two-thirds of the current-account gap, fell 14 percent. The shortfall was as high as 5 percent of gross domestic product in the fiscal year ended March 31, Finance Minister Palaniappan Chidambaram said this week.

“The possibility the current-account deficit might shrink is a major positive for the rupee,” said Sudarshan Bhatt, chief currency trader at state-run Corporation Bank in Mumbai. He said also that traders may avoid taking positions before Commerce Minister Anand Sharma releases India’s foreign trade policy at 11 a.m. in New Delhi today.

The rupee advanced 0.1 percent to 54.1750 per dollar as of 10:23 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 53.7725 yesterday, the strongest level since Feb. 28. The currency will stay between 54 and 54.30 today, according to Corporation Bank. The market will be shut for a local holiday tomorrow.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 29 basis points, or 0.29 percentage point, to 8.62 percent.

Export Outlook

Tata Consultancy Services Ltd., India’s largest software- services exporter, expects a “strong deal pipeline” with new business from all of its key markets to help boost sales this year, Chief Executive Officer N. Chandrasekaran said yesterday.

The company is “comfortable” with the rupee’s current level and is maintaining its strategy of hedging foreign- exchange exposure, Chief Financial Officer Rajesh Gopinathan said in an interview with Bloomberg TV India today.

Three-month onshore rupee forwards traded at 55.17 per dollar, compared with 55.07 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were 54.90 versus 54.92. 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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