Rupee Snaps Three-Day Advance on Speculation RBI Curbing Gains

India’s rupee ended three days of gains on speculation the central bank is intervening to prevent a stronger currency from hurting a revival in the economy.

The currency retreated after touching a one-week high as state-owned lenders may have bought dollars on behalf of the Reserve Bank of India, said Paresh Nayar, the Mumbai-based head of currency and money markets at FirstRand Ltd. The rupee has rallied 4.4 percent against the dollar this year as global funds stepped up purchases of local bonds and stocks.

“Globally things are looking up and investments have been coming into emerging-market assets,” Nayar said. “State-run banks probably intervened in the market on behalf of the RBI to curb the sharp appreciation.”

The rupee ended the day little changed at 59.1900 a dollar versus 59.1825 on June 6, reversing an intraday gain of as much as 0.3 percent, according to prices from local banks compiled by Bloomberg. It is the best performer this year among Asia’s 11-most traded currencies.

International investors added almost $7 billion to holdings of Indian bonds and stocks this quarter, according to exchange data, on speculation new Prime Minister Narendra Modi will step up efforts to spur growth.

The rupee also strengthened as economic data from the U.S. and China fueled optimism a global recovery is gathering pace.

U.S. employers hired more than 200,000 workers for a fourth straight month in May, according to figures released on June 6. China reported the nation’s biggest trade surplus in five years yesterday.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, declined 18 points, or 0.18 percentage point, to 7.06 percent, according to data compiled by Bloomberg.

Three-month offshore non-deliverable forwards on the rupee were little changed at 59.90 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 U.S. currency.

To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Sam Nagarajan, Thomas Kutty Abraham

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