Rupee gains most in three months

The rupee gained the most in three months as economic reports bolstered confidence in the global economic recovery and crude oil prices retreated.

Most Asian currencies and stocks rose after data on Tuesday showed increases in Chinese and Indian manufacturing, Japanese payrolls and Australian retail sales, following a Commerce Department report on Monday that showed US incomes climbed more than economists predicted. Crude prices fell 0.9% on Monday, the most in almost two weeks, after Saudi Arabia offered to make up for a shortfall in oil supplies stemming from unrest in Libya.

"The rupee's push higher in the near term is down to oil prices," said Nick Verdi, a foreign-exchange strategist at Barclays in Singapore. "While oil prices rose significantly in the past weeks, markets seem to think it won't yet significantly impact the global economy. So, we are seeing a bit of risk taken back on in Asian currencies."

The rupee rose 0.7% to 44.9450 per dollar in Tuesday's trade. Earlier, it touched 44.9150 per dollar, the highest level since January 4. The currency strengthened 1.4% in February. Crude was little changed at $97 a barrel in New York, following a 5.2% jump last month.

India's economy expanded 8.2% in the quarter ended December 31, making it the fastest-growing major economy after China, data showed on Tuesday. Manufacturing grew at the fastest pace in three months. The purchasing managers' index rose to 57.9 in February from 56.8 in January, HSBC Holdings and Markit Economics said in on Tuesday. Data above 50 indicates expansion.

The government will narrow its budget deficit to 4.6% of gross domestic product in the fiscal year ending March 2012, Finance Minister Pranab Mukherjee said in his Budget speech on Monday.

"I don't think the Budget was that significant for the currency," Verdi said. "We still expect the rupee to underperform the rest of Asian currencies."

Offshore forwards indicate the rupee will trade at 45.71 to the dollar in three months, compared with expectations for a rate of 46.03 on Monday. Forwards are agreements to buy or sell assets at a set price and date.