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India’s Rupee Set for Worst Week This Year on Growth Concerns

India’s rupee headed for the biggest weekly drop since December after the government predicted economic growth will slow to the least in a decade.

Gross domestic product will increase 5 percent in the year through March 31, the least since 2002-2003, according to a Central Statistical Office statement released in New Delhi yesterday. The median of 34 estimates in a Bloomberg News survey was 5.5 percent. India’s current-account deficit widened to a record in the quarter through September and the nation has the biggest budget shortfall among the largest emerging markets.

The rupee declined 0.6 percent today and this week to 53.5150 per dollar as of 9:30 a.m. in Mumbai, the biggest drop since the five days through Dec. 21, according to data compiled by Bloomberg. The currency touched 52.89 on Feb. 6, the strongest level since Oct. 17, prompting importers to buy dollars, according to Federal Bank Ltd.

The GDP projection is “raising concerns about how the government would fund its twin deficits,” analysts at Edelweiss Financial Advisors Ltd., including Mumbai-based Vinay Khattar, wrote in a research report today. Technical charts indicate the rupee may drop to 53.75 and 54 in coming days, they wrote.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 57 basis points, or 0.57 percentage point, this week to 9.38 percent. The rate rose four basis points today.

Three-month onshore rupee forwards traded at 54.59 per dollar, compared with 54.27 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.44 versus 54.13. 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: Amit Prakash at aprakash1@bloomberg.net

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