India’s Rupee Drops on Speculation Importers Bought More Dollars
India’s rupee fell for a second day on speculation importers boosted dollar purchases before a public holiday tomorrow.
Signs Europe’s debt crisis is deepening, with data tomorrow forecast to show German consumer confidence will fail to improve in November and French household sentiment fell for a fourth month in October, also pressured the rupee. Losses will be limited on optimism foreign funds will buy more higher-yielding assets after the Federal Reserve said yesterday it will maintain pro-growth policies, according to Development Credit Bank Ltd.
“With today’s spot settlement scheduled for Oct. 30 because of the bank holiday tomorrow, importers will be looking to buy the dollar for month-end payments,” said Naveen Raghuvanshi, a Mumbai-based trader at the lender. “There seems to be no good news coming out of the euro zone.”
The rupee declined 0.1 percent from Oct. 23 to 53.7975 per dollar as of 10:37 a.m. in Mumbai, according to data compiled by Bloomberg. Financial markets where shut yesterday for a public holiday. One-month implied volatility, a gauge of exchange-rate swings used to price options, was unchanged at 10.25 percent.
The Fed said interest rates may stay near zero at least through mid-2015 and kept unchanged a bond-purchase plan unveiled last month. At an auction on Oct. 22, foreign investors paid the highest fee since June for the right to buy Indian government debt without any tenor restrictions.
Monetary Policy Review
The Reserve Bank of India will keep its repurchase rate at 8 percent on Oct. 30, according to 14 of 26 economists surveyed by Bloomberg. Ten expect a 25 basis point reduction and two predict a half percentage point cut. The central bank will lower lenders’ reserve requirements to 4.25 percent from 4.50 percent, according to 15 of the analysts, while nine see no change and two forecast a cut to 4 percent.
Three-month onshore rupee forwards were at 54.68 per dollar, compared with 54.69 on Oct. 23, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.59 versus 54.71 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
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