Indian Rupee Snaps Four-Day Gain on Dollar Demand From Importers

India’s rupee snapped a four-day gain on speculation oil importers’ stepped up purchases of the dollar, countering inflows into the nation’s stocks.

Indian refiners are meeting most of their dollar needs in the local foreign-exchange market as the Reserve Bank of India tapers direct currency supplies to them, Governor Raghuram Rajan said Nov. 13. Foreigners will probably add to this month’s net purchases of $906 million of Indian shares, according to FirstRand Ltd., after Federal Reserve Chairman Ben S. Bernanke said the benchmark U.S. interest rate will probably stay near zero long after the central bank’s bond-buying ends.

The rupee slipped 0.3 percent to 62.5775 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It swung between gains of 0.2 percent and losses of 0.5 percent today. The currency climbed as much as 0.9 percent yesterday to a two-week high of 61.8700 before ending just 0.1 percent stronger.

“Inflows will probably continue,” said Paresh Nayar, head of currency and money markets at FirstRand in Mumbai. “However, recent price moves show that there will be good demand for the dollar around the 62 level,” and that will limit gains in the Indian currency, he said.

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, to 11.27 percent. The RBI’s offer of concessional swaps for dollars raised by banks, scheduled to end Nov. 30, has attracted $22.7 billion so far, the central bank said in a statement today.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s 6.5 percent threshold, Bernanke said yesterday in a speech to economists in Washington. He said a “preponderance of data” would be needed to begin removing accommodation.

Three-month onshore forwards fell 0.6 percent to 64.04 per dollar, according to data compiled by Bloomberg. Offshore non-deliverable rupee contracts declined 0.5 percent to 64.20 per dollar. 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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