India’s rupee rose from a record low after a report showed the nation’s current-account deficit narrowed last quarter.
The shortfall narrowed to 3.6 percent of gross domestic product from an unprecedented 6.7 percent in the the preceding three months, central bank data showed today. For the fiscal year that ended March 31, the gap widened to 4.8 percent of GDP from 4.2 percent in the previous period. The rupee fell to an all-time low of 60.765 per dollar yesterday on concern signs of a pickup in the U.S. economy will boost demand for the dollar.
“Today’s data helped to an extent but the demand and supply conditions in the foreign-exchange market will soon take over this sentiment,” said Paresh Nayar, head of currency and money markets at the Indian unit of FirstRand Ltd. (FSR) “I don’t expect the same magnitude of weakening that we had yesterday but 60 will prove to be a good support” for the dollar and the rupee is unlikely to strengthen beyond that level, he said.
The rupee advanced 0.3 percent to 60.5350 per dollar as of 10:13 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. It has fallen 6.7 percent this month, the worst performance among 78 global currencies tracked by Bloomberg, and plunged 10.3 percent this quarter, the most since 1991.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose seven basis points, or 0.07 percentage point, today to 12.66 percent.
The Reserve Bank of India has sold dollars in the past two weeks to curb the rupee’s fall, traders said, asking not to be named as the information isn’t public. Nomura Holdings Inc. is still bearish on the rupee, but is watchful for more measures from policy makers to boost dollar supply, analysts including Singapore-based Craig Chan wrote in a report yesterday.
Three-month onshore rupee forwards rose 0.1 percent to 61.46 per dollar, according to data compiled by Bloomberg. Offshore non-deliverable contracts advanced 0.1 percent to 61.73. 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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