Indian Rupee Drops to One-Month Low on Importers’ Dollar Demand

India’s rupee fell to a four-week low on speculation importers stepped up dollar purchases to meet month-end payments.

The rupee declined for a second day as exchange data showed foreign funds sold a net $1.2 billion of Indian bonds this month through yesterday. The rupee’s losses will probably bottom out as exporters repatriate overseas income to take advantage of a favorable exchange rate, according to DCB Bank Ltd. A lower rupee boosts the value of overseas earnings in local terms.

“The rupee’s weakness is primarily because of huge dollar demand from importers,” said Naveen Raghuvanshi, a Mumbai-based currency trader at DCB Bank. “I think the currency should stabilize now as these are attractive levels for exporters to sell the greenback.”

The rupee fell 0.3 percent to 60.7675 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 60.8850 earlier, the lowest since March 21.

India’s trade deficit widened to $10.5 billion in March from $8.1 billion in February, data released April 11 showed.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose 16 basis points, or 0.16 percentage point, to 12.34 percent.

Three-month offshore non-deliverable forwards declined 0.7 percent, the most since April 3, to 62.02 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the greenback.

To contact the reporter on this story: Divya Patil in Mumbai at dpatil7@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma, Dick Schumacher

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