India’s Rupee Declines in Week as Growth Near Slowest Since 2009

India’s rupee headed for a weekly loss as government data showed Asia’s third-largest economy expanded at near the slowest pace in three years.

Gross domestic product increased 5.5 percent last quarter, the Central Statistical Office said in a statement today. That compares with 5.3 percent in the previous three months, which was the slowest pace since March 2009. A deteriorating outlook for the economy may curb tax collections and put at risk the government’s goal of cutting its budget deficit, the Reserve Bank of India said on Aug. 23.

“Weak growth, coupled with possible fiscal slippage and inaction from the RBI, is not the combination of settings investors would like to see,” analysts at Credit Agricole CIB, including Hong Kong-based Frances Cheung, wrote in a research report today. “The rupee is to be kept under pressure.”

The rupee declined 0.3 percent this week to 55.675 per dollar as of 12:30 p.m. in Mumbai, according to data compiled by Bloomberg. The currency fell 0.1 percent today, matching the monthly loss. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 9.80 percent, the lowest level since May 3. The gauge has fallen 140 basis points, or 1.4 percentage points, this month.

Riskier assets will decline ahead of Federal Reserve Chairman Ben S. Bernanke’s speech at a meeting of central bankers in Jackson Hole, Wyoming today, according to Credit Agricole. India’s government plans to narrow its budget shortfall to 5.1 percent of GDP in the year through March 2013, from 5.8 percent in the previous 12 months.

Three-month onshore rupee forwards traded at 56.72 per dollar, compared with 56.63 yesterday, and offshore non- deliverable contracts were at 56.67 from 56.59. 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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