India Rupee Fluctuates as Importer Dollar Demand Offsets Inflows

India’s rupee swung between gains and losses amid speculation fund inflows into local stocks were countered by oil importers’ dollar purchases.

Foreigners will probably add to this month’s net purchases of $750 million of Indian shares, according to FirstRand Ltd., after Federal Reserve Chairman Ben S. Bernanke said the benchmark U.S. interest rate will probably stay near zero long after the central bank’s bond-buying ends. Indian refiners are meeting most of their dollar needs in the local foreign-exchange market as the Reserve Bank of India tapers direct currency supplies to them, Governor Raghuram Rajan said Nov. 13.

The rupee slipped 0.1 percent to 62.43 per dollar as of 9:44 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. It swung between gains and losses of 0.2 percent today. The currency climbed as much as 0.9 percent yesterday to a two-week high of 61.8700 before ending just 0.1 percent stronger.

“Inflows will probably continue,” said Paresh Nayar, head of currency and money markets at FirstRand in Mumbai. “However, recent price moves show that there will be good demand for the dollar around the 62 level,” and that will limit gains in the Indian currency, he said.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, fell 15 basis points, or 0.15 percentage point, to 11.54 percent.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s 6.5 percent threshold, Bernanke said yesterday in a speech to economists in Washington. He said a “preponderance of data” would be needed to begin removing accommodation.

Three-month offshore non-deliverable rupee forwards fell 0.3 percent to 64.12 per dollar. 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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