Mumbi: India's rupee strengthened, erasing earlier losses, on optimism the government will be able to push through its plan to allow more foreign investment.
The rupee advanced 0.2 per cent to 54.6850 per dollar in Mumbai, after earlier dropping as much as 0.4 per cent, according to data. One-month implied volatility, a measure of expected moves in exchange-rates used to price options, was unchanged at 10 per cent. The rupee "would need strong political consensus on reforms and the Reserve Bank of India's growth-supportive monetary policy to get into bullish mode," said J. Moses Harding, executive vice-president at IndusInd Bank in Mumbai.
Three-month onshore rupee forwards traded at 55.51 per dollar, compared to 55.50 on Monday, according to data. Offshore non-deliverable contracts were at 55.44 versus 55.48. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
The RBI has kept its benchmark repurchase rate at 8 per cent since April, citing price pressures.
The monetary authority is next scheduled to review policy on Dec. 18.