Indian Rupee Fluctuates Before RBI, Fed Monetary Policy Reviews

India’s rupee swung between gains and losses before tomorrow’s central bank meeting, with economists predicting an increase in borrowing costs for the second time in as many months.

The Reserve Bank of India will raise the benchmark repurchase rate to 7.75 percent from 7.50 percent, according to 20 of 24 economists in a Bloomberg survey. One forecasts a move to 8 percent and three no change. Barclays Plc sees rates on hold, which will help boost growth in Asia’s third-largest economy and spur equity inflows.

“The RBI’s October meeting may provide some support to the rupee,” analysts at Barclays, including Singapore-based Hamish Pepper, wrote in a research report. “But we acknowledge the risk of one more repo-rate hike given the new RBI governor’s preference to convey a stern inflation-fighting message.”

The rupee traded little changed at 61.48 per dollar as of 10:11 a.m. in Mumbai, compared with 61.46 on Oct. 25, according to prices from local banks compiled by Bloomberg. It rose and fell as much as 0.1 percent. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed eight basis points, or 0.08 percentage point, to 11.76 percent.

The currency strengthened 1.8 percent this month after the Federal Reserve unexpectedly refrained from paring stimulus that’s boosted demand for emerging-market assets. The Fed is likely to delay lowering its monthly bond purchases until March, according to a Bloomberg News survey of economists conducted Oct. 17-18. The Federal Open Market Committee starts a two-day meeting tomorrow, the first since a 16-day government shutdown took at least $24 billion out of the economy.

Three-month onshore rupee forwards rose 0.2 percent to 62.86 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts were steady at 62.94. 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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