India Rupee, Bonds Drop as Inflation Quickens More Than Forecast

India’s 10-year government bond yield rose to the highest level in 12 weeks and the rupee fell to a two-month low after a report showed inflation accelerated last month by more than economists predicted.

Consumer prices climbed 10.09 percent from a year earlier, after a 9.84 percent increase in September, official data showed after the market shut yesterday. The median estimate in a Bloomberg survey was for a 9.9 percent gain. Industrial production (INPIINDY) grew 2 percent in September, another report showed, compared with a 3.5 percent rise predicted in a separate survey.

“CPI inflation has once more crossed the psychological double digit,” Indranil Pan, an economist at Kotak Mahindra Bank Ltd. in Mumbai, wrote in a research report today. “This leaves the Reserve Bank of India with little option but to focus on inflation containment despite a continuing growth slump.”

The yield on the 7.16 percent notes due May 2023 rose five basis points, or 0.05 percentage point, to 9.11 percent as of 9:53 a.m. in Mumbai, according to prices from the central bank’s trading system. The rate climbed as high as 9.15 percent earlier, the highest level since Aug. 19.

The rupee fell 0.1 percent to 63.73 per dollar, according to prices from local banks compiled by Bloomberg. It touched 63.91 earlier, the weakest level since Sept. 13, before paring losses on speculation the central bank intervened. The RBI probably sold dollars to prevent the currency from dropping beyond 64, according to two traders, who asked not to be named as the information isn’t public.

WPI Report

Wholesale price inflation probably accelerated 6.95 percent in October from 6.46 percent in September, according to the median of 40 estimates in a Bloomberg survey before data due tomorrow.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, climbed 22 basis points to 14.16 percent.

Three-month onshore rupee forwards rose 0.1 percent to 65.21 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts declined 0.1 percent to 65.73. 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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