Indian Rupee Drops Most in Two Weeks on Importers’ Dollar Demand

India’s rupee fell by the most in more than two weeks on speculation oil importers took advantage of a more favorable exchange rate to buy dollars.

The rupee dropped 0.4 percent to 62.3250 per dollar as of 10:29 a.m. in Mumbai, the biggest decline since Jan. 27, according to prices from local banks compiled by Bloomberg. It earlier reached 62.01, the strongest level since Jan. 23, after a report yesterday showed inflation dipped below 9 percent for the first time since 2012.

“Dollar demand by importers and a strong U.S. dollar overseas are likely to keep the rupee in a tight range,” analysts at Edelweiss Securities Ltd., including Vinay Khattar in Mumbai, wrote in a research report today. The Indian currency will stay between 61.70 and 62.30 today, they predicted.

Indian oil companies need to complete their dollar repayments to the central bank by May 31, after borrowing the greenback in August via foreign-currency swaps, an official with direct knowledge of the matter said, asking not to be identified because the decision hasn’t yet been made public. Policy makers provided dollars directly to oil firms last year after the rupee declined to a record low.

Consumer prices rose 8.79 percent in January from a year earlier, official data showed after the market shut yesterday, below the 9.2 percent median estimate in a Bloomberg survey and the previous month’s 9.87 percent. Factory output fell 0.6 percent in December, while November’s previously reported 2.1 percent contraction was revised to a 1.3 percent decline.

The nation’s trade deficit shrank to $9.92 billion in January from $10.1 billion in December, official data showed Feb. 11. A report tomorrow may show wholesale price-inflation eased to 5.60 percent last month from 6.16 percent, according to the median of 42 estimates in a Bloomberg survey.

Interim Budget

Investors will now await the government’s interim budget on Feb. 17, before national elections due by May, analysts at Standard Chartered Plc, including Anubhuti Sahay in Mumbai, wrote in a research report yesterday.

India is likely to meet its goal of cutting the fiscal deficit to 4.8 percent of gross domestic product in the year through March and will set a 4.2 percent target for the next 12 months, the U.K. bank predicted.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, was little changed at 8.41 percent.

Three-month offshore non-deliverable forwards were little changed at 63.28 per dollar, data compiled by Bloomberg show. 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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