By Anil Varma April 8 (Bloomberg) -- India’s rupee advanced, reversing an earlier decline, on speculation China will revise its foreign- exchange policy and allow its currency to appreciate. China may announce a modification of its exchange-rate policy in the next few days, the New York Times reported, citing people with knowledge of the matter who insisted on anonymity. The policy revision will allow for a small but immediate rise in the yuan’s value, and the possibility of greater variation subsequently, the newspaper said. “The rupee turned around after the news on China’s plan to revise its currency policy,” said Viswanathan Kumar, chief currency trader at State Bank of Travancore in Mumbai. “A stronger yuan will push Asian currencies higher. The rupee had rallied after China revalued the yuan in 2005.” The rupee strengthened 0.2 percent to 44.4675 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. The currency touched 44.3175 yesterday, the strongest level since Sept. 8, 2008. Offshore contracts indicate bets the rupee will trade at 44.48 to the dollar in a month, compared with expectations of 44.58 yesterday. 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. In discussions within the Chinese leadership, the central bank’s arguments for a strong, more flexible yuan, may have prevailed, the New York Times said. U.S. Treasury Secretary Timothy Geithner is due to have talks with China’s Vice Premier Wang Qishan today. Economic Outlook The rupee declined earlier on concern weaker-than-expected economic data out of Japan and the U.S. will damp demand for emerging-market assets. The MSCI Asia Pacific Index of regional shares dropped 0.5 percent after a government report showed machinery orders in Japan, the world’s second-largest economy, declined 5.4 percent in February. Economists surveyed by Bloomberg had forecast a 3.7 percent gain. Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. is “far from being out of the woods” in recovering from its worst recession since the 1930s. American consumer credit decreased $11.5 billion in February from the previous month, the Fed said yesterday. Economists expected $700 million less credit. To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net

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