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Indian Rupee Approaches One-Month High as Output Seen Rebounding

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Dec. 10 (Bloomberg) -- India’s rupee rose toward a one-month high before a report that economists predict will show factory output in Asia’s third-largest economy rebounded.

Industrial production climbed 5 percent in October from a year earlier, after contracting 0.4 percent the previous month, according to the median of 30 estimates in a Bloomberg News survey before data due Dec 12. Factory output in China gained the most in eight months in November, adding to signs the outlook for regional economies is improving. India also reports trade and inflation numbers this week.

“Industrial output growth is likely to return to positive territory,” Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong, wrote in a research report today. “While the trade gap will remain close to record highs, overall, the numbers will be positive for the rupee.”

The currency ended little changed from Dec. 7 at 54.5050 per dollar in Mumbai, according to data compiled by Bloomberg. The rupee had earlier advanced as much as 0.4 percent to 54.2550. This was the strongest level since the one-month high of 54.0450 touched Dec. 6.

One-month implied volatility, a gauge of expected moves in exchange rates used to price options, rose five basis points, or 0.05 percentage point, to 10.35 percent.

India’s trade deficit widened to a record $20.96 billion in October as the slowdown in the world economy contributed to a 1.6 percent drop in exports. Industrial production in China climbed 10.1 percent in November, a report showed yesterday, faster than the 9.8 percent forecast in a Bloomberg survey.

Inflation Data

Credit Agricole predicts a report on Dec. 14 will show wholesale prices in India “inched lower” in November, while a Bloomberg survey forecasts the benchmark measure rose 7.60 percent, compared with 7.45 percent the previous month.

Three-month onshore rupee forwards traded at 55.45 per dollar, compared with 55.39 on Dec. 7, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.35 versus 55.33. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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