Indian Rupee Snaps Two-Day Loss as Exports Jump Most in 7 Months

India’s rupee snapped a two-day decline as government data showing the best export performance in seven months spurred optimism the $1.8 trillion economy is on the rebound.

Overseas shipments from India rose 12.4 percent in May from a year earlier, the most since October, signaling a recovery after falling in February and March, the trade ministry said today. The rupee has rallied 4.3 percent this year against the dollar, making it the best performer among the 11-most traded currencies in Asia.

“The exports data turned out favorably, which was supportive of the rupee,” said Sugandha Sachdeva, assistant vice president and head of currency research at Religare Commodities Ltd. in Noida, outside New Delhi.

The rupee ended the day at 59.2775 a dollar versus 59.2975 yesterday, according to prices from local banks compiled by Bloomberg. It may trade between 58.90 and 59.90 in the coming days, Sachdeva said.

Capital inflows are strengthening the currency, though the central bank may stem gains to shield the recovery in exports, said Paresh Nayar, the head of currency and money markets at FirstRand Ltd. in Mumbai.

Overseas investors pumped a net $3.2 billion into local bonds and stocks this month after the clearest election mandate in three decades for the Bharatiya Janata Party fueled expectations Prime Minister Narendra Modi’s administration will help revive growth from near the slowest pace in a decade,

“Inflows are still continuing and that is helping the rupee,” Nayar said. “The expectation is the new government will be able to take measures that will help revive growth.”

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose five basis points, or 0.05 percentage point, to 7.12 percent, according to data compiled by Bloomberg.

Three-month offshore non-deliverable forwards on the rupee rose 0.1 percent to 60.08 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 the U.S. currency.

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