India’s rupee advanced on speculation exporters sold their overseas earnings, taking advantage of the currency’s approach toward this month’s low.
Funds based abroad bought $3.1 billion more Indian shares than they sold this month through Dec. 20, taking their total additions this year to $23.2 billion, according to Securities & Exchange Board of India data. The currency had weakened earlier after U.S. Senator Joseph Lieberman said time is running out for lawmakers and President Barack Obama to agree on a budget deal by year-end to avoid triggering more than $600 billion in tax increases and spending cuts.
“The rupee has gained probably because some exporters sold dollars,” said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. “That helped overcome the bearish undertone due to weak global cues.”
The rupee rose 0.2 percent to 54.9550 per dollar in Mumbai, according to data compiled by Bloomberg. It earlier touched 55.2150, approaching 55.2575 hit on Dec. 21, which was the lowest level since Nov. 29.
The currency fell 1.1 percent last week, the biggest loss since the five days through Nov. 9. It dropped 3.4 percent this year after plunging 16 percent in 2011. The market will be shut tomorrow for Christmas.
One-month implied volatility, a gauge of expected moves in exchange rates used to price options, was unchanged at 10.10 percent. The rate has decreased 190 basis points, or 1.9 percentage points, in 2012.
Three-month onshore rupee forwards traded at 55.90 per dollar, compared with 56.07 on Dec. 21, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.79 versus 56.00. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.