Rupee Falls From 3-Week High on Record Current-Account Deficit

India’s rupee retreated from the strongest level in almost three weeks on concern a record current-account deficit will boost demand for dollars.

The shortfall widened to $22.3 billion in the quarter ended Sept. 30, official data showed Dec. 31. The world’s largest bullion buyer may raise taxes on gold imports to reduce the gap, Finance Minister Palaniappan Chidambaram said in New Delhi yesterday. The central bank will cut its benchmark repurchase rate during 2013, according to 20 of 22 analysts surveyed by Bloomberg. Ten forecast the rate will be lowered by 100 basis points or more.

“The current-account deficit has been a cause of concern for India,” said Sean Yokota, Singapore-based head of Asia strategy at Skandinaviska Enskilda Banken AB. “The rupee is likely to strengthen in the second half, when the central bank begins aggressive easing and the trade deficit comes in a bit.”

The rupee declined 0.2 percent to 54.4900 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 54.2650 yesterday, the strongest level since Dec. 13. The rupee dropped 3.5 percent last year after plunging 16 percent in 2011.

One-month implied volatility, a gauge of expected moves in exchange rates used to price options, fell 45 basis points, or 0.45 percentage point, to 9.70 percent. The rate decreased 190 basis points in 2012.

Exports will pick up in the rest of the fiscal year through March 2013, Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said yesterday. The rupee is expected to remain at current levels for the rest of the period, Rangarajan predicted.

Three-month onshore rupee forwards traded at 55.52 per dollar, compared with 55.33 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.37 versus 55.21. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

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