Indian Rupee Completes Weekly Gain on Optimism Imports Will Slow

India’s rupee completed its biggest weekly advance in more than a month on optimism imports will slow, helping rein in a record current-account deficit.

The International Energy Agency and Organization of Petroleum Exporting Countries yesterday cut forecasts for global oil demand in 2013. Gold prices were poised for a third weekly decline after some investors reduced holdings of the metal as signs the U.S. economic recovery is gaining momentum spurred speculation that the Federal Reserve may pare stimulus. India is the world’s biggest bullion-importing nation and ships in more than 80 percent of its oil needs.

“A sustained fall in gold and crude oil prices, which are the biggest drivers of the current-account deficit,” will contribute to a slight strengthening of the rupee, analysts at Edelweiss Financial Advisors Ltd., including Mumbai-based Vinay Khattar, wrote in a report today.

The rupee gained 0.5 percent this week to 54.5250 per dollar in Mumbai, according to data compiled by Bloomberg, the biggest advance since the five days through March 8. The currency ended unchanged today from April 10. The market was shut yesterday for a local holiday.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 31 basis points, or 0.31 percentage point, this week to 7.52 percent.

Export Concern

The rupee pared gains today after rising earlier by as much as 0.3 percent, as Infosys Ltd., the nation’s second-largest software services exporter, forecast annual sales growth as slow as half the pace analysts estimated. The company’s shares plunged 21 percent, the most in 10 years, helping push the S&P BSE Sensex Index down 1.6 percent.

The shortfall in India’s current account, the broadest measure of trade, rose to an all-time high of $32.6 billion in the quarter through Dec. 31 as oil and gold imports surged.

Industrial production in Asia’s third-largest economy rose 0.6 percent in February after a 2.4 percent gain in January, official data showed today. The median of 30 estimates in a Bloomberg News survey was for a 1.3 percent drop.

Three-month onshore rupee forwards traded at 55.59 per dollar, compared with 55.57 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.47 versus 55.38. 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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