Rupee Completes First Weekly Gain in a Month as Oil Retreats

The rupee completed its first weekly advance in a month as a retreat in oil prices tempered concern that India’s trade deficit will widen.

Brent crude has declined two percent from a nine-month high of $115.71 per barrel on June 19 on signs violence in Iraq has so far spared output from OPEC’s second-largest producer. India’s trade deficit was $11.2 billion in May, the widest in 10 months. India imports about 80 percent of its oil.

The rupee strengthened 0.2 percent this week to 60.0850 per dollar in Mumbai, the first gain since the period ended May 23, according to prices from local banks compiled by Bloomberg. The currency rose 0.1 percent today. It lost 0.3 percent this quarter, Asia’s worst performance after Indonesia’s rupiah.

“The rupee is closely tracking global crude oil prices,” said Ankur Jhaveri, co-head of currency and rates in Mumbai at brokerage Edelweiss Financial Services Ltd. “A cooling off of oil prices means there will be less pressure on the rupee.”

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, fell 42 basis points, or 0.42 percentage point, today and 67 basis points from a week ago to 7.06 percent, according to data compiled by Bloomberg.

Three-month offshore non-deliverable forwards on the rupee gained 0.1 percent today to 60.97 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.

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