India Rupee Climbs Most in Asia on Iran Deal, RBI Swap Extension

India’s rupee rose the most among its regional peers on optimism a drop in oil costs after Iran agreed to curb its nuclear program will help shrink the South Asian nation’s current-account deficit.

Brent crude fell 1.7 percent after Iran agreed yesterday to curtail nuclear activities in return for easing of some sanctions on oil, auto parts, gold and precious metals, the first major crack in a decade-long deadlock. The Reserve Bank of India on Nov. 22 conditionally extended the deadline for banks to swap dollars raised through overseas borrowings at discounted rates, further bolstering the local currency.

“The Iran deal is a huge boost as our oil costs will come down,” said Vikas Babu, a trader at Andhra Bank in Mumbai. “The swap-window extension will have a limited, but positive impact on the exchange rate.”

The rupee gained 0.6 percent to 62.4950 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 62.4375 earlier, the strongest level since Nov. 20. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, was little changed at 11.60 percent.

India imports about 80 percent of its oil and refiners are the biggest purchasers of foreign currency in the nation. The shortfall in the broadest measure of trade will narrow to $56 billion in the year through March 2014 from a record of $88 billion in the previous 12 months, RBI Governor Raghuram Rajan predicted last month.

Concessional Swaps

Indian banks now have until Dec. 31 to avail themselves of the central bank’s offer of concessional swaps for dollars raised through overseas debt, compared with the previous deadline of Nov. 30, as long as the funds have been committed by the end of this month, the RBI said in a statement after market hours on Nov. 22.

Three-month offshore non-deliverable rupee forwards rose 0.3 percent to 64.04 per dollar, according to data compiled by Bloomberg. 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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