India’s rupee completed a fourth weekly drop as the government seeks parliament’s approval for pro-growth policies announced this quarter.
Prime Minister Manmohan Singh needs lawmakers’ support for plans to allow more foreign investment in pension and insurance industries. On the opening day of the winter session of parliament yesterday, Singh survived a bid to oust his government over its decision to permit foreign companies to open supermarkets. The currency touched the lowest level in more than two months, erasing gains made since the retail plan was announced in mid-September.
“Although we have been leaning towards the optimistic side on the currency and the reform process, we recognize that this positivity is fraught with downside risks,” analysts at HSBC Holdings Plc, including Hong Kong-based Paul Mackel, wrote in a report today. “The coming days will be pivotal for the rupee.”
The rupee declined 0.6 percent this week to 55.5150 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 55.6050 today, the weakest level since Sept. 7. The government began announcing measures to improve public finances and attract investment on Sept. 13.
One-month implied volatility, a measure of expected moves in exchange-rates used to price options, fell 50 basis points, or 0.50 percentage point, this week to 9.50 percent. The rate dropped 25 basis points today.
Three-month onshore rupee forwards were at 56.40 per dollar, compared with 56.11 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 56.48 versus 56.12. 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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