Bloomberg News

Rupee Set for Best Week Since November on Growth, Export Outlook

January 10, 2013

India’s rupee was headed for the biggest weekly gain since November on speculation the central bank will reduce borrowing costs to support economic growth.

Infosys Ltd. (INFO), India’s second-largest software exporter, reported third-quarter profit today that beat analysts’ estimates and raised its sales forecast for the year through March. Economists predict data today will show an expansion in factory output in Asia’s third-largest economy slowed in November, even as inflation is forecast to stay near a 10-month low. The Reserve Bank of India is scheduled to review interest rates on Jan. 29.

“Leading indicators suggest Indian export growth can pick up in the period ahead,” Jonathan Cavenagh, a foreign-exchange strategist at Westpac Banking Corp. (WBC) in Singapore, wrote in a research note. “We also feel the growth and inflation mix is becoming more favorable for the rupee.”

The currency advanced 1 percent this week to 54.5100 per dollar as of 9:42 a.m. in Mumbai, the biggest increase since the five days through Nov. 30, according to data compiled by Bloomberg. The rupee gained 0.1 percent today and touched 54.4050 earlier, the strongest level since Jan. 3.

One-month implied volatility in the rupee, a gauge of expected moves in exchange rates used to price options, rose 20 basis points, or 0.20 percentage point, to 10 percent this week. The rate climbed 15 basis points today.

Wooing Investors

Westpac joins Credit Agricole CIB and Credit Suisse AG in recommending purchases of the rupee, saying interest-rate reductions and the government’s policy revamps will boost the currency. Indian exports fell 4.2 percent in November, official data showed, the seventh straight month of decreases. December data are due anytime in the coming four days.

India’s industrial production rose 0.1 percent in November from a year earlier, according to the median estimate of 34 economists in a Bloomberg survey before data due around 11 a.m. local time. That compares with an 8.2 percent increase in October. A separate survey predicts a report on Jan. 14 will show wholesale prices rose 7.37 percent last month, near a 10- month low of 7.24 percent in November.

Finance Minister Palaniappan Chidambaram is planning a tour of Asia and Europe aimed at wooing investors to the nation as a record current-account deficit threatens growth, according to four people with knowledge of the matter, who asked not to be identified before the official announcement.

“Talk of the Indian finance minister’s roadshow to attract foreign capital should be rupee-positive in early trade,” Dariusz Kowalczyk, a strategist at Credit Agricole in Hong Kong, wrote in a research report today. The currency may pare gains once the factory output data are published, he wrote. Credit Agricole expects a contraction.

Three-month onshore rupee forwards traded at 55.48 per dollar, compared with 55.57 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.36 versus 55.57. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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