India’s rupee fell the most in more than two weeks on speculation oil importers will step up dollar purchases to repay borrowings from the central bank.
Refiners will make the payments by the end of May, according to an official with direct knowledge of the matter, who asked not to be identified as the decision is not yet public. The swap facility was introduced in August when the currency plunged to a record low.
The rupee dropped 0.5 percent to 62.44 per dollar in Mumbai, the biggest decline since Jan. 27, according to prices from local banks compiled by Bloomberg. It earlier reached 62.01, the strongest level since Jan. 23, after a report yesterday showed inflation dipped below 9 percent for the first time since 2012.
“There were stop-losses triggered after the earlier surge,” said Vikas Babu, a trader at Andhra Bank in Mumbai. “The news about the maturing swaps amplified dollar-buying later in the day.”
Consumer prices rose 8.79 percent in January from a year earlier, official data showed after the market shut yesterday, below the 9.2 percent median estimate in a Bloomberg survey and the previous month’s 9.87 percent. Factory output fell 0.6 percent in December, while November’s previously reported 2.1 percent contraction was revised to a 1.3 percent decline.
The nation’s trade deficit shrank to $9.92 billion in January from $10.1 billion in December, official data showed Feb. 11. A report tomorrow may show wholesale price-inflation eased to 5.60 percent last month from 6.16 percent, according to the median of 42 estimates in a Bloomberg survey.
Investors will now await the government’s interim budget on Feb. 17, before national elections due by May, analysts at Standard Chartered Plc, including Anubhuti Sahay in Mumbai, wrote in a research report yesterday.
India is likely to meet its goal of cutting the fiscal deficit to 4.8 percent of gross domestic product in the year through March and will set a 4.2 percent target for the next 12 months, the U.K. bank predicted.
One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose six basis points, or 0.06 percentage point, to 8.47 percent.
Three-month offshore non-deliverable forwards fell 0.4 percent to 63.51 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.