Rupee Retreats From Seven-Week High on Concern Inflows Will Slow

India’s rupee retreated from a seven-week high on concern capital inflows into the nation’s stocks will slow amid signs a cooling economy is curbing corporate earnings.

Reliance Industries Ltd., the second-biggest stock on the S&P BSE Sensex by weighting, retreated the most in six months after quarterly sales lagged behind forecasts. Tata Consultancy Services Ltd., the nation’s largest software exporter, slid to a two-month low before it reported financial results. The rupee also fell as investors sought the relative safety of the dollar before finance ministers and central bankers from the Group of 20 nations meet for two days from tomorrow in Washington.

“Negative stock markets and the recovery in the Dollar Index have contributed to the weakness in the rupee,” Abhishek Goenka, chief executive officer at India Forex Advisors Ltd., wrote in an research report today. “The major trend of rupee remains bearish.”

The currency declined 0.1 percent to 54.2050 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 53.7725 earlier, the strongest level since Feb. 28. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell four basis points, or 0.04 percentage point, to 8.33 percent. The Dollar Index, which tracks the greenback against six counterparts, rose 0.6 percent.

India’s gross domestic product rose 5 percent in the fiscal year ended March 31, the weakest pace since 2003, according to official estimates. Foreigners added $1.9 billion to holdings of Indian stocks in March, after boosting ownership by more than $4 billion in each of the previous three months, exchange data show.

Current Account

The rupee rose earlier on optimism falling commodity prices will temper inflation and help narrow a record current-account deficit. Brent crude dropped 11 percent this month, according to data compiled by Bloomberg, a positive for a nation that imports about 80 percent of its oil needs. India’s wholesale price-based inflation slowed to a 40-month low of 5.96 percent in March, official data showed April 15.

“The tide is turning better for India,” Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore, wrote in a note to clients today. “The recent drop in oil prices will favor the rupee the most in Asia by reducing the twin deficits and inflation,” he said, referring to the budget and current-account shortfalls.

Three-month onshore rupee forwards traded at 55.07 per dollar, compared with 55.22 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.92 versus 55.04. 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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