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Rupee falls on intervention fears

A cashier counts Indian rupee currency notes inside a bank in MumbaiIndia’s rupee fell the most in a month on speculation the central bank intervened to curb gains that threaten exports, while importers stepped up dollar purchases to pay month-end bills.

The rupee has gained 2.8 percent this month in Asia’s best performance on optimism a new government will step up efforts to revive the economy. Narendra Modi will be sworn in as India’s prime minister today after his Bharatiya Janata Party won national elections with the first single-party majority since 1984. The currency also declined as the S&P BSE Sensex (SENSEX) of local shares pared gains to 0.1 percent after rising as much as 2 percent during the day.

“State-owned banks bought dollars, possibly on behalf of the Reserve Bank of India,” said Paresh Nayar, head of currency and money markets FirstRand Ltd. in Mumbai. “We are also seeing oil companies demanding dollars.”

The rupee declined 0.4 percent to 58.7150 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest drop since April 23. It touched 58.3350 on May 23, the strongest level since June 2013.

India’s current-account deficit narrowed to $1.2 billion in the three months through March from $4.2 billion the previous quarter, official data released after trading hours showed today. The shortfall in the broadest measure of trade shrank to $32.4 billion for financial year ended March 31 from $87.8 billion the year ago.

The BJP won 282 of 543 parliamentary seats, more than the 272 needed to form a government on its own, according to poll results published May 16. Foreign funds bought a net $4.3 billion of local stocks and bonds this month through May 22, the latest exchange data show.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell five basis points, or 0.05 percentage point, to 7.4475 percent, data compiled by Bloomberg show.

Three-month offshore non-deliverable forwards declined 0.7 percent to 59.59 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.-Bloomberg