Rupee Declines to a Record Low on Concern Greece Will Leave Euro

India’s rupee dropped to a record low as investors favored the perceived safety of the dollar over emerging-market assets on concern Greece will leave Europe’s currency union.

Greece’s former Prime Minister Lucas Papademos said that while it is unlikely the nation will leave the euro, it’s still a risk, according to a report in the Wall Street Journal yesterday. The Dollar Index, which tracks the greenback against those of six major trading partners, rose 0.2 percent to a 20- month high. The rupee pared losses on speculation the central bank intervened in the market to support the currency.

“The external situation is negative and will keep the rupee under pressure,” said Kamlakar Rao, head of foreign- exchange trading in Mumbai at state-run Allahabad Bank. (ALBK) “The market is speculating that we’re seeing RBI intervention.”

The rupee declined 0.5 percent to 55.6475 per dollar as of 9:28 a.m. in Mumbai, according to data compiled by Bloomberg. It fell to an all-time low of 55.8275 earlier. The rupee’s one- month implied volatility, a measure of exchange-rate swings used to price options, rose 80 basis points, or 0.8 percentage point, to this year’s high of 14.3 percent.

Swings in the rupee may widen because exporters must meet a new central bank rule today that requires them to convert a minimum of 50 percent of their overseas earnings, Rao said. The central bank announced the regulation on May 10.

Six-month onshore currency forwards traded at 57.54 a dollar, compared with 57.20 yesterday, and offshore non- deliverable contracts were at 57.79 from 57.46. 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

To contact the editor responsible for this story: Sandy Hendry at

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