(Corrects exporters must convert at least 50 percent of earnings to rupees in second paragraph - original story said dollars.)
India’s rupee strengthened, rebounding from a five-month low, on speculation the central bank sold dollars to curb losses in Asia’s worst-performing currency this quarter.
The rupee dropped past 54 a dollar earlier today as concern Europe’s debt-crisis is worsening damped demand for emerging- market assets. The Reserve Bank of India this month raised interest rates on local banks’ foreign-currency deposits and said exporters must convert at least 50 percent of their earnings to rupees. The RBI’s efforts will probably prove futile and the rupee may plunge to an unprecedented 55 a dollar before ending June at 54, according Standard Chartered Plc.
“The central bank will likely continue intervening and regulatory measures will keep coming in,” said Priyanka Kishore, a foreign-exchange strategist at Standard Chartered in Mumbai. “Tinkering with the domestic dollar supply is not the same as encouraging capital inflows, which will need a change in the global backdrop.”
The rupee advanced 0.2 percent to 53.8300 per dollar as of 9:45 a.m. in Mumbai, according to data compiled by Bloomberg. It dropped to 54.0700 earlier, the lowest level since Dec. 15. The currency has lost 5.5 percent this quarter.
The rupee’s one-month implied volatility, a measure of exchange-rate swings used to price options, rose 12 basis points, or 0.12 percentage point, to 11.82 percent.
Six-month onshore currency forwards were trading at 55.24 a dollar, compared with 55.53 yesterday, and offshore non- deliverable contracts were little changed at 55.64. 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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