India’s rupee fell from a one-week high on speculation importers bought dollars to benefit from the exchange rate and as traders pared bearish positions on the U.S. currency ahead of the weekend.
The rupee had gained earlier today on optimism the central bank’s efforts to boost the supply of dollars will ease concerns about financing the nation’s current-account deficit. The shortfall in the broadest measure of trade widened to $23 billion in the three months through June from $18.08 billion the previous period, according to the median of 23 estimates in a Bloomberg survey of economists before data due next week.
“There was some short-covering and possibly importer purchases” of dollars, said Vikas Babu, a trader at Andhra Bank in Mumbai.
The rupee fell 0.7 percent to 62.4975 per dollar in Mumbai, ending the week with a 0.4 percent loss, according to prices from local banks compiled by Bloomberg. It had risen to 61.7650 earlier, the highest level since Sept. 19. The currency’s 5.1 percent advance in September is still the best performance among Asia’s 11 most-traded currencies.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 83 basis points, or 0.83 percentage point, today to 14.66 percent.
Reserve Bank of India Governor Raghuram Rajan this month allowed banks to borrow more from abroad and offered to swap the funds, along with dollars raised through deposits from citizens living overseas, at concessional rates. The current-account gap will narrow to 3.2 percent of gross domestic product in the year through March 2014 from a record 4.8 percent in the prior period, according to Religare Capital Markets Ltd.
Global funds bought a net $2.1 billion of Indian stocks this month, exchange data show, partly spurred by the U.S. Federal Reserve’s decision on Sept. 18 to not pare its monthly bond purchases. The inflows helped the rupee rebound 10.2 percent from an all-time low of 68.8450 touched Aug. 28.
“Forget tapering. To make money in these markets, you have to dabble a bit in the risky stuff,” analysts at BNP Paribas SA, including Singapore-based Mirza Baig, wrote in a research report today. “The rupee looks the least bad among the problem-child currencies; sell the dollar against the rupee.”
One-month onshore rupee forwards fell 0.8 percent today to 63.02 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts dropped 0.8 percent to 63.20. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.