Rupee Falls From 11-Week High on Dollar Buys Before U.S. Holiday

India’s rupee retreated from the highest level in 11 weeks on speculation importers boosted dollar purchases before a U.S. market holiday today.

The Asian currency was also pressured due to concerns about Europe’s economy, according to Development Credit Bank Ltd. European finance ministers meet in Brussels today to discuss tackling their region’s debt crisis. The rupee had strengthened earlier on optimism investors will step up purchases of the nation’s assets as policy makers boost efforts to spur economic growth and improve public finances.

“Because of the U.S. holiday, there is concern that we may have insufficient inflows or even outflows tomorrow,” said Naveen Raghuvanshi, a trader at Development Credit Bank in Mumbai. “That affected the rupee.”

The rupee declined 0.1 percent to 53.7550 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 53.6350 earlier, the strongest level since Nov. 2. One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose 20 basis points, or 0.20 percentage point, to 10.35 percent.

Policy Revamps

The Reserve Bank of India will lower its repurchase rate to 7.75 percent from 8 percent at a Jan. 29 review to support Asia’s third-largest economy, according to 11 of 14 analysts in a Bloomberg survey. Two predict a cut to 7.50 percent and one sees no change. The government last week allowed state refiners to adjust diesel prices over a period of time, adding to steps aimed at curbing energy subsidies and tackling the widest budget deficit among the largest emerging markets.

The rupee pared losses today, after dropping as much as 0.5 percent earlier , after India raised import duty on gold and platinum to 6 percent from 4 percent. The government expects demand for gold will moderate, Arvind Mayaram, economic affairs secretary, said in New Delhi.

“The rupee did react in the last couple of minutes to this news and the market would already have discounted it,” said Paresh Nayar, head of money-markets and currency at FirstRand Ltd. in Mumbai. “This is part of the overall reform movement that has taken on positive momentum over the past few days and is positive for the rupee.”

Three-month onshore rupee forwards traded at 54.84 per dollar, compared with 54.85 on Jan. 18, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.71 versus 54.60. 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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