Indian Rupee Rises as Current Account Deficit Seen Under Control

India’s rupee rose on optimism a drop in oil prices will help keep the nation’s current account deficit under control and slow inflation.

Brent crude has dropped 28 percent since the end of June to $80.15 a barrel, helping slow consumer price inflation to 5.52 percent in October, the slowest pace since the index was created in January 2012. The current account gap in the year to March is likely to be 1.7 percent to 2 percent of gross domestic product, CNBC-TV18 channel reported today citing government officials it didn’t identify. The gap was 1.7 percent in 2013 and 4.7 percent in the year to March 2013.

“The reports of current account deficit remaining under control are positive for the currency,” said Ankur Jhaveri, co-head of currency and rates in Mumbai at Edelweiss Financial Services Ltd. The rupee weakened earlier on the back of dollar demand from oil companies, he said.

The currency rose 0.1 percent to close at 61.8675 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It weakened as much as 0.2 percent earlier.

One-month implied volatility in India’s currency, a measure of expected exchange-rate swings used to price options, fell seven basis points today to 6.17 percent in Mumbai, according to data compiled by Bloomberg.

Three-month offshore non-deliverable rupee forwards rose 0.1 percent to 62.67 per dollar. Forwards are agreements to buy or sell assets at a set price and date, and non-deliverable contracts are settled in dollars.

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