India’s rupee completed its first weekly loss in three on speculation importers stepped up dollar buying to pay month-end bills.
While these purchases pressured the rupee today, according to ICICI Bank Ltd. (ICICIBC), Morgan Stanley predicted in a research note dated yesterday that the currency will be among the main beneficiaries of a drop in gold and oil prices. Brent crude dropped 6.5 percent this month to $103 per barrel and gold prices fell 8.4 percent to $1,463.50 an ounce, data compiled by Bloomberg show. India ships in 80 percent of its oil and is the world’s top bullion importer.
“We see an increasingly compelling case to add long exposure to the rupee,” analysts at Morgan Stanley, including London-based Hans-Guenter Redeker, wrote in the report. Risks to the currency, including those stemming from political volatility before elections next year, “are well accounted for in the recent underperformance,” they wrote.
The rupee declined 0.8 percent this week to 54.3750 per dollar in Mumbai, according to data compiled by Bloomberg. It lost 0.3 percent today. One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, fell 40 basis points, or 0.40 percentage point, this week to 8.18 percent. It fell seven basis points today.
The central bank will lower its repurchase rate to 7.25 percent from 7.5 percent on May 3, according to 21 of 25 economists surveyed by Bloomberg. Three see no change and one forecasts a cut to 7 percent.
Three-month onshore rupee forwards traded at 55.38 per dollar, compared with 55.18 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.14 versus 54.95. 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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