India’s Rupee Rises to Three-Week High as Trade Deficit Narrows

India’s rupee rose to the highest level in three weeks as the trade deficit narrowed and before reports that economists predict will show easing inflation.

The nation’s trade shortfall shrank to $9.92 billion in January from $10.1 billion in December, official data showed yesterday, while Commerce Secretary Rajeev Kher said at a briefing the ministry has sought a relaxation of gold-import curbs. Reports due today will probably show slower consumer-price gains and a smaller decrease in factory output, Bloomberg surveys predict.

“The figures bode well for India’s external financing needs,” Mole Hau, an economist at BNP Paribas SA in Hong Kong, wrote in a report yesterday. “However, the currency’s stability will be tested as soon as administrative restrictions on gold imports are lifted as this year’s general election heats up.”

The rupee advanced 0.2 percent to 62.1050 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 62.0450 earlier, the strongest level since Jan. 23. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 32 basis points, or 0.32 percentage point, to 8.41 percent.

China’s export and import growth unexpectedly accelerated in January, official data showed today, defying signs the world’s second-largest economy will slow while also fueling speculation that fake shipments are resurfacing.

Economic Reports

Indian consumer prices probably rose 9.20 percent in January from a year earlier, after a 9.87 percent increase in the previous month, according to the median estimate of 37 economists in a Bloomberg survey. Industrial production contracted 1.2 percent in December after shrinking 2.1 percent in November, according to another survey.

Federal Reserve Chairman Janet Yellen yesterday pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps” and signaled that the bar is high for any change in that plan.

Three-month offshore non-deliverable forwards rose 0.3 percent to 63.29 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

Before it's here, it's on the Bloomberg Terminal.