Rupee Gets Boost From Smallest India Trade Deficit in Five Years

  • Currency posts its biggest daily advance since March 17
  • Disappointing U.S. housing data also aided gain: Religare

The rupee climbed the most in a month after India’s trade deficit narrowed to a five-year low and weak U.S. data strengthened the case for the Federal Reserve to go slow in raising interest rates.

The trade shortfall was at $5.07 billion for March, thanks to a 21.6 percent year-on-year plunge in imports, official data showed late on Monday. Exports fell 5.5 percent. The rupee was Asia’s biggest gainer after Malaysia’s ringgit on Wednesday as figures showing a slump in U.S. housing starts last month caused the greenback to weaken for a third day on Tuesday, when Indian markets were shut for a public holiday.

“A narrowing of the trade deficit is rupee positive,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. “Disappointing housing data from the U.S. strengthens the case for the Fed to stick to its dovish stance, which is another positive for the Indian currency.”

The rupee jumped 0.5 percent, the most since March 17, to 66.2225 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It rose to 66.0950 earlier, the strongest level since April 5.

The yield on Indian sovereign bonds due January 2026 rose two basis points to 7.44 percent in Mumbai, according to prices from the central bank’s trading system.

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