India’s rupee dropped yesterday, erasing a monthly gain, after the central bank kept interest rates unchanged and raised its inflation estimate.
India’s currency declined 0.1% to 55.6575 per dollar in Mumbai, according to data compiled by Bloomberg. This compares with 55.6375 at the end of June.
One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 11.20% today, having fallen 45 basis points, or 0.45 percentage point, this month.
The rupee gained earlier on speculation policy makers worldwide will boost efforts to arrest a global slowdown, according to Edelweiss Financial Advisors Ltd.
The shortfall in India’s current account, the broadest measure of trade, widened to a record 4.2% of gross domestic product in the year through March 2012 from 2.7% the previous 12 months, official data showed.
The RBI on Monday had said the government may miss its goal of cutting the budget deficit to 5.1% of GDP by March 2013 from 5.8% in the last fiscal year.
Indian stocks meanwhile climbed for the third day amid speculation global central banks may take measures to support growth outweighed a move by the Reserve Bank of India to hold interest rates.
The BSE India Sensitive Index, or Sensex, rose 0.5% to 17,236.18 at close, paring the monthly loss to 1.1%.
Tata Motors Ltd, the owner of Jaguar Land Rover, climbed to a two-week high. Wipro Ltd, the third-biggest software exporter, gained the most in about eight weeks, leading its peers higher.
The Sensex has risen 12% this year, driven by record purchases by overseas investors. Offshore funds have bought $1.6bn of Indian stocks in July.
Gross domestic product expanded 5.3% in the first quarter, the least since 2003.
From Gulf Times.