India’s rupee extended a rebound from a two-month low on speculation policy makers in the U.S. and Japan will maintain economic stimulus policies that have boosted capital flows into emerging markets. The currency gained for a second day as India scrapped a proposal to tighten rules for overseas investors seeking to benefit from double taxation treaties. The Bank of Japan (8301) must expand its monetary base and buy bonds with maturities of more than five years, Kikuo Iwata, a government nominee for deputy governor, said in a parliament hearing today. Federal Reserve Vice Chairman Janet Yellen said yesterday the U.S. central bank should press on with $85 billion in monthly debt buying while tracking possible costs and risks from the program. “The rupee’s gains are mostly driven by global sentiment,� said Vikas Babu, a trader in Mumbai at state-run Andhra Bank. (ANDB) “The tax clarifications helped equities, which supported the rupee. However the positivity will not last long as importers will jump in to buy dollars.’ The rupee advanced 0.2 percent to 54.755 per dollar as of 10:40 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 55.14 yesterday, the weakest level since Jan. 8. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 10.02 percent. It touched 10.17 percent earlier, the highest level since Feb. 1. The Reserve Bank of India removed restrictions on overnight and intra-day open positions on foreign-exchange contracts involving the rupee, it said in a March 1 statement. The move could exaggerate fluctuations in the rupee, Priyanka Kishore, a strategist at Standard Chartered Plc in Mumbai, said in an interview yesterday. Three-month onshore rupee forwards traded at 55.81 per dollar compared with 55.98 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.76 versus 55.99. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars. To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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