Rupee Reverses Gain After Approaching 1-Month High on Importers

India’s rupee declined, reversing earlier gains, on speculation companies bought dollars to meet import payments.

The currency strengthened past 60 a dollar for the first time since April 9, making it attractive to some importers. The rupee lost also on concern China’s economic slowdown will damp investment flows into the region, according to Andhra Bank. Global funds sold a net $1.85 billion of Indian bonds last month through April 30, the biggest outflow since October, the exchange data show.

“There is demand for dollars from importers and some corporates, which has dented the rupee’s gain,” said Ashtosh Raina, a Mumbai-based head of foreign exchange trading at HDFC Bank Ltd.

The rupee declined 0.1 percent to 60.2250 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 59.9975 earlier. The currency swung between gains of 0.3 percent and losses of 0.2 percent today.

The currency gained earlier as the greenback retreated on concern weakness persists in the U.S. jobs market even as unemployment declilnes.

The U.S. participation rate, which measures the proportion of working-age adults holding a job or looking for one, fell to match the lowest level since 1978, data showed on May 2. Average hourly earnings also declined and more people sought part-time work because they couldn’t find full-time jobs.

“The rupee gained on broad dollar weakness after the participation rate in the U.S. workforce declined,” said Vikas Babu, a Mumbai-based currency trader at Andhra Bank. The gains in the rupee were limited as the Chinese data was weak, he added.

Fed Outlook

Labor Department data showed U.S. employers boosted payrolls in April by 288,000, the most since January 2012, while the jobless rate plunged to 6.3 percent, the lowest since September 2008.

The participation rate and average hourly earnings are among the gauges cited by Federal Reserve Chair Janet Yellen as reasons why the world’s largest economy will need “extraordinary support” from the Fed for “some time to come,” when she spoke at a conference in Chicago on March 31. Yellen is due to testify to lawmakers this week amid speculation the U.S. central bank will keep rates near zero.

China’s manufacturing contracted for a fourth month in April. The purchasing managers’ index was at 48.1, HSBC Holdings Plc and Markit Economics said in a statement today. That compared with a 48.4 median estimate from analysts surveyed by Bloomberg News, a preliminary reading of 48.3 and March’s 48. Numbers below 50 indicate contraction.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell seven basis points, or 0.07 percentage point, to 11.7925 percent.

Three-month offshore non-deliverable forwards on the rupee declined 0.3 percent to 61.27 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: Amit Prakash at aprakash1@bloomberg.net Sam Nagarajan, Sunil Jagtiani

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