India’s rupee strengthened from its lowest level in almost four weeks after provisional data showed exports increased in January for the first time in nine months.
Merchandise shipments climbed 0.8 percent from a year earlier and imports advanced 6.1 percent, leaving a trade deficit of $20 billion, Director General of Foreign Trade Anup Pujari said in New Delhi today. Central bank Governor Duvvuri Subbarao said Feb. 11 the nation’s current-account deficit in the year through March may be “significantly higher” than a record 4.2 percent of gross domestic product in the previous period.
The rise in exports was the “silver lining,” analysts at Barclays Plc, including Singapore-based Nick Verdi, wrote in a research report today. “We do not see significant potential for rupee appreciation” as the current-account gap will stay large, they wrote.
The rupee rose 0.1 percent to 53.82 per dollar in Mumbai after falling as much as 0.1 percent earlier, according to data compiled by Bloomberg. It touched 54.1075 yesterday, the lowest level since Jan. 18. The currency will drop to 54 in 12 months, Barclays predicts. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell one basis point, or 0.01 percentage point, to 9.27 percent.
Investors are also cautious before a two-day meeting of the Group of 20 nations in Moscow starting Feb. 15, Verdi said by phone today. The G-20, which includes the Group of Seven developed economies and emerging markets such as Brazil, China and India, may not favor currency appreciation as global trade is still at an early stage of recovery, according to Barclays.
The G-7 released a statement in London yesterday, seeking to soothe mounting fears of a currency war with a pledge to avoid devaluing their exchange rates in the pursuit of stronger economic growth.
Three-month onshore rupee forwards traded at 54.81 per dollar, compared with 55.02 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.64 versus 54.82. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.