India’s rupee strengthened for a second day on speculation exporters will take advantage of a three-week run of losses to repatriate overseas income.
The rupee also climbed as offshore forwards contracts showed traders pared bets for further weakness in the Indian currency. Options contracts indicated demand for dollar purchases eased.
“Some banks are selling dollars because exporters are expected to come in to convert their foreign exchange,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Current market levels look good for exporters to sell dollars.”
The rupee advanced 0.1 percent to 51.66 a dollar as of 10:07 a.m. in Mumbai, according to data compiled by Bloomberg. It lost 5.8 percent in the last three weeks and touched an all- time low of 52.185 on March 3. The currency may trade between 51.50 and 51.75 today, Bhatt said.
The rupee has tumbled 21 percent in the past year, the third-worst performance among the 10 most-traded Asian currencies. South Korea’s won and Indonesia’s rupiah have declined more.
Offshore contracts indicate traders bet the rupee will trade at 51.90 per dollar in a month, compared with expectations of 52.05 on March 6. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non- deliverable contracts are settled in dollars rather than the local currency.
The dollar’s so-called risk-reversal rate against the rupee, the premium on call options over put options, fell to a three- week low, showing demand dropped for contracts that allow purchases of the U.S. currency. A call option grants the holder the right to buy an asset. The one-month 25-delta risk-reversal rate fell to 2.25 percent, the lowest since Feb. 17. It reached 3.5 percent on Feb. 27, the most since Jan. 14.
Source : bloomberg.com