Bloomberg News

India Rupee Set for Worst Week This Year as Trade Deficit Widens

February 14, 2013

India’s rupee headed for the biggest weekly loss of 2013 as provisional data showed the trade deficit widened last month.

Merchandise shipments climbed 0.8 percent from a year earlier and imports advanced 6.1 percent, leaving a trade gap of $20 billion, Director General of Foreign Trade Anup Pujari said Feb. 13. Central bank Governor Duvvuri Subbarao said Feb. 11 the current-account shortfall in the year through March may be “significantly higher” than a record 4.2 percent of gross domestic product in the previous 12 months. A continued rise in the deficit will be negative for the nation’s credit profile, according to Moody’s Investors Service, New York-based analyst Atsi Sheth said in a statement yesterday.

“The pressure on the rupee is going to continue until the monthly trade deficit drops to about $15 billion or $16 billion,” said Samiran Chakraborty, an economist at Standard Chartered Plc in Mumbai.

The rupee declined 0.8 percent this week to 53.92 per dollar as of 9:51 a.m. in Mumbai, the biggest drop since the five days through Dec. 21, according to data compiled by Bloomberg. The currency, which was little changed from yesterday, touched 54.1075 on Feb. 12, the lowest level since Jan. 18.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 30 basis points, or 0.30 percentage point, to 9.05 percent this week. The rate dropped four basis points today.

Wholesale prices rose 6.62 percent last month from a year earlier, official data showed yesterday, compared with 7.18 percent in December and 6.98 percent predicted in a Bloomberg survey. Industrial production fell 0.6 percent in December after a revised 0.8 percent drop the previous month, a government report showed Feb. 11.

Three-month onshore rupee forwards traded at 54.94 per dollar, compared with 54.92 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.83 versus 54.76. 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: Amit Prakash at aprakash1@bloomberg.net


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