India’s Rupee Jumps after Trade Deficit Drops

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India’s Rupee Jumps after Trade Deficit Drops India’s rupee advanced for the fourth straight day after a report indicated that trade shortfall shrunk the most in nearly a year while foreign investors increased their holdings of local bonds and stocks.

The rupee advanced nearly 0.1 percent to 60.8275 per dollar at the close of trading in Mumbai, resulting in a weekly drop of 0.3 percent. The deficit fell to $10.8 billion in August after retreating oil prices reduced import prices, compared with $12.2 billion, reported the Department of Commerce. This was the biggest decline since September 2013.

“The rupee earlier gained on the back of optimism about inflows, driven by improving economic fundamentals,” Paresh Nayar, a Mumbai-based head of currency and money markets at FirstRand Ltd., told Bloomberg News. “Later, the gains narrowed as the nationalized banks were reported buying dollars, which could be on behalf of the central bank.”

The rupee’s one-month implied volatility, which measures the expected swings in the exchange rate that is used to set price to options, jumped 0.22 percentage point, or 22 basis points, this week to close at 7.14 percent. It declined 15 basis points this Friday.

Yield on the nation’s 8.4 percent government bonds that mature in July 2024 surged five basis points, or 0.05 percentage point, since Sept. 12 to 8.46 percent.

Meanwhile, Ukraine’s hryvnia fell the most in over five years on speculation the scheduled foreign-currency sale didn’t meet demand by banks. The currency dropped 11 percent to trade at 14.40 per dollar as of 7:10 p.m. Kiev time, its steepest depreciation since January 2009. Yield on the Ukraine’s Eurobonds that mature in July 2017 rose 1.52 percentage points this week. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com