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Rupee Gains Most in a Week as Higher Tariff May Slow Gold Import

India’s rupee rose the most in a week on speculation gold imports will slow after the government increased tariffs on the metal, helping rein in the nation’s current-account deficit.

The currency pared a weekly loss as Finance Minister Pranab Mukherjee, presenting the annual budget in parliament, doubled the customs duty on gold bars and coins to 4 percent and the excise duty on refined gold to 3 percent. The rupee also gained after the government eased taxes on overseas borrowings by local companies, a move that may spur capital inflows.

“The measures on gold were positive for the rupee as the concern is about financing the deficit,” said Vikas Babu, a trader in Mumbai at state-run Andhra Bank. “We are still seeing demand for dollars ahead of the fiscal year end, so the rupee’s gains will be capped.”

The rupee appreciated 0.4 percent to 50.1912 per dollar in Mumbai, the biggest gain since March 9, according to data compiled by Bloomberg.

The currency is still 0.7 percent lower in the week after the Reserve Bank of India said yesterday that “upside risks” to inflation have increased because of an increase in global oil prices. Brent oil, the benchmark that India uses, has risen 14.5 percent to $122.91 a barrel this year.

Gold accounted for 12.2 percent of India’s imports between April and September, compared with 9.9 percent a year earlier, according to Standard Chartered Plc. The shortfall in India’s current account, the broadest measure of trade, will be 3.6 percent of gross domestic product in the 12 months ending March 31 and lower in the next fiscal year, Mukherjee said today.

One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 9.75 percent, according to data compiled by Bloomberg.

Three-month onshore forward contracts traded at 51.33 a dollar, compared with 51.48 yesterday, and offshore non-deliverable contracts were at 51.36 from 51.53. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

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