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Rupee Completes Sixth Weekly Drop as Output Falls: Mumbai Mover

India’s rupee completed a sixth weekly decline, the longest losing streak since October 2008, as a report showed industrial production unexpectedly contracted.

Factory output fell 3.5 percent in March from a year earlier, the Central Statistical Office said in a statement today, after a 4.1 percent gain in February. The median estimate of 32 economists in a Bloomberg News survey was for a 1.7 percent gain. The rupee’s slide will be limited by the central bank’s dollar sales, according to Credit Agricole CIB.

“The industrial output data is very disappointing and is negative for the rupee,” said Dariusz Kowalczyk, a strategist at Credit Agricole in Hong Kong. “Until we see a turnaround in economic data, sentiment will be weak.”

The rupee declined 0.3 percent this week to 53.6350 per dollar in Mumbai, according to data compiled by Bloomberg. The currency, which has lost 5.1 percent this quarter, declined 0.4 percent today.

The rupee’s one-month implied volatility, a measure of exchange-rate swings used to price options, rose 70 basis points, or 0.70 percentage point, this week to 11.70 percent.

Asia’s third-largest economy probably expanded 6.9 percent in the 12 months through March 2012, the least in three years, government estimates show. Standard & Poor’s cut India’s credit outlook to negative from stable last month, putting at risk its investment-grade status.

Central Bank Measures

The rupee pared losses yesterday after the Reserve Bank of India cut the amount of overseas income companies can hold in foreign currency to 50 percent from 100 percent, forcing them to convert earnings. On May 4, the central bank raised interest rates on non-rupee deposits by as much as 300 basis points and freed up borrowing costs on foreign-exchange loans to exporters.

“The easier norms for capital inflows” will help improve dollar supply, Tushar Poddar and Vishal Vaibhaw, analysts in Mumbai at Goldman Sachs Group Inc., wrote in a report today. “We have taken a sanguine view of limited rupee depreciation.”

Six-month onshore currency forwards were trading at 55.22 a dollar, compared with 55.05 yesterday, and offshore non-deliverable contracts were at 55.34 from 55.25. 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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