India’s rupee dropped from near a seven-week high on speculation importers are stepping up dollar purchases to pay month-end bills.
The currency won’t move much from current levels as a glut in inflows accumulated due to holidays will offset demand for the greenback, according to Andhra Bank. Markets were shut April 19 and will close again April 24 for the Mahavir Jayanti celebrations. Concerns about India’s current-account deficit have eased after brent crude slipped 8.5 percent this month and gold fell 10 percent. The nation is the world’s biggest bullion importer and fourth-largest consumer of oil.
“The rupee will be rangebound,” said Vikas Babu, a trader at state-run Andhra Bank in Mumbai. “After the initial positive view on the commodity price drop, investors are now getting cautious as the outlook on the global economy is still hazy and could impact capital inflows.”
The rupee declined 0.3 percent from April 18 to 54.1475 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 53.7725 on April 17, the strongest level since Feb. 28. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose seven basis points, or 0.07 percentage point, to 8.65 percent.
Three-month onshore rupee forwards traded at 55.15 per dollar, compared with 54.93 on April 19, according to data compiled by Bloomberg. Offshore non-deliverable contracts were 54.93 versus 54.74. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.