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India Rupee Gains Most in a Month as Moody’s Sees Stable Rating

India’s rupee rose the most in a month as Moody’s Investors Service maintained its stable outlook on the nation’s investment-grade credit rating.

The currency halted a five-day slide after Moody’s said yesterday India’s Baa3 ranking is supported by economic growth and investment that’s more than emerging-market averages. Exporters also probably sold dollars taking advantage of the currency’s decline to a three-month low yesterday, according to Krishnamoorthy Harihar, treasurer at FirstRand Ltd., the Indian unit of South Africa’s second-largest financial-services company.

“The sentiment toward the rupee was helped a little by the news from Moody’s,” said Mumbai-based Harihar. “It remains to be seen whether the gains can be held given fiscal concerns and other fundamental weaknesses.”

The rupee gained 0.5 percent, the biggest gain since Oct. 22, to 55.4550 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 55.8825 yesterday, the weakest level since Sept. 6.

One-month implied volatility, a measure of expected moves in exchange-rates used to price options, was unchanged at 9.5 percent.

India’s economy may have expanded 5.5 percent in the three months through September from a year earlier, Finance Minister Palaniappan Chidambaram predicted on Nov. 24, matching the growth rate in the preceding quarter. Economists forecast a 5.3 percent increase in gross domestic product, according to the median estimate in a Bloomberg survey before data due Nov. 30.

Fiscal Deficit

Moody’s said the high household-savings rate and a relatively competitive private sector will help boost growth from 5.4 percent in the fiscal year ending March 2013 to 6 percent or higher the following year. The fiscal deficit remains a hindrance to a rating upgrade, it said.

Finance Minister Palaniappan Chidambaram said Nov. 24 the government is “optimistic” of narrowing its budget gap to 5.3 percent of gross domestic product, from 5.8 percent, by selling assets and auctioning airwaves.

The shortfall will be 5.6 percent in the year through March, according to the median estimate of six investors and analysts surveyed yesterday by Bloomberg.

Three-month onshore rupee forwards were at 56.34 per dollar, compared with 56.59 per dollar yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts advanced 0.5 percent to 56.37. 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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