The Indian rupee halted its earlier declines as traders speculated that exporters brought earnings back home to benefit from the currency’s decline to the lowest level in seven weeks.
The rupee was up 0.2 percent at 60.0563 by 2:48 p.m. Mumbai time, after earlier declining by up to 0.6 percent to 60.5250, the lowest since April 29. The currency had earlier declined 1.5 percent over the last two days.
“The rupee reversed the losses as exporters were seen selling dollars,” Naveen Raghuvanshi, a currency trader at DCB Bank Ltd in Mumbai told Bloomberg. Raghuvanshi also added that an upsurge in the stock market boosted the currency.
The rupee had earlier declined over fears that the rising oil prices will negatively affect the country’s trade deficit and send inflation soaring. India imports nearly 80 percent of all oil consumed in the country. The Brent crude soared to the highest level in nine months last week over bets that Iraqi violence will negatively affect oil supplies.
A key Reserve Bank of India policymaker Ashima Goyal revealed that the rupee and the interest rates will weather the increase in oil prices due as foreign investors bet on political stability to bring in the much-needed foreign capital. Foreign investors have invested over $10 billion in Indian stocks and bonds in the April-June quarter after the election results boosted sentiment.
The rupee’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign prices to options, grew 0.13 percentage point, or 13 basis points, to 8.29 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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