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India Rupee Drops From Seven-Month High as Importers Buy Dollars

March 11 (Bloomberg) -- India’s rupee fell from the highest level in seven months on speculation importers stepped up purchases of the dollar to benefit from the exchange rate.

The currency rose as much as 0.4 percent earlier as official data showed the trade shortfall shrank to $8.13 billion in February from $9.91 billion in January. Consumer-price gains probably eased to the lowest since January 2012, according to a Bloomberg survey of economists before data due tomorrow.

The rupee fell 0.2 percent to 60.9550 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 60.6050 earlier, the strongest since Aug. 12. The currency has rebounded 12.9 percent from a record low of 68.845 on Aug. 28.

“There was importer-buying of the dollar,” said Vikas Babu, a trader at Andhra Bank in Mumbai. “An improvement in inflation has been priced in and there’s unlikely to be rupee appreciation beyond 60.50.”

The shortfall in India’s current account, the broadest measure of trade, will be kept below $40 billion in the fiscal year that ends March 31, Finance Minister Palaniappan Chidambaram said in a March 7 briefing in New Delhi. The deficit was a record $88 billion in the previous 12 months.

Slowing Inflation

Consumer prices probably rose 8.30 percent in February from a year earlier, according to the median of 42 estimates in a Bloomberg survey. January’s increase was 8.79 percent. Wholesale-price gains slowed to 4.90 percent from 5.05 percent, another survey predicts before a March 14 report.

Industrial production probably contracted 0.9 percent in January after a 0.6 percent decrease the previous month, according to the median of 42 estimates in a separate Bloomberg survey before a report tomorrow.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, climbed 28 basis points, or 0.28 percentage point, to 8.25 percent, data compiled by Bloomberg show.

Three-month offshore non-deliverable forwards gained 0.3 percent to 61.87 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Sam Nagarajan, Karthikeyan Sundaram

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