Rupee Declines to 10-Week Low on Gold Festival: Mumbai Mover

India’s rupee fell to a 10-week low on speculation gold importers are stepping up dollar purchases today on Akshaya Tritiya, a festival day on which it is considered auspicious to buy the metal. Government bonds gained.

Demand for gold in the world’s largest importer of the commodity is seen at 30 metric tons today, compared with 20 tons a year ago, said Prithviraj Kothari, managing director of Riddisiddhi Bullions Ltd. in Mumbai. The price of the precious metal fell 7.8 percent last month, data compiled by Bloomberg show. Overseas investors bought a net $1.2 billion of Indian stocks this month through May 9, exchange data show.

“We are seeing importers buying the dollar today, and also we have the seasonal May depreciation pressure as overseas loans are typically repayed this month,” said Naveen Raghuvanshi, a trader at Development Credit Bank Ltd. (DEVB) in Mumbai. “Even with massive inflows the rupee is weakening, and I dread what will happen to the currency if the inflows stop.”

The rupee declined 0.3 percent to 54.975 per dollar as of 9:48 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 54.9875 earlier, the weakest level since March 4. The inflows should limit the currency’s drop to around 55.05, Development Credit Bank’s Raghuvanshi said.

The rupee has fallen against the dollar in May in seven of the last 10 years mainly due to the refinancing or repayment of overseas loans taken at the start of the financial year that begins April 1, he said.

Inflation Easing

Wholesale price inflation slowed to 5.45 percent in April from a year earlier, after a 5.96 percent increase in March that was the least since 2009, according to the median estimate of 29 economists in a Bloomberg survey before data due tomorrow.

The yield on the 8.15 percent bonds due June 2022 fell two basis points to 7.57 percent, according to the central bank’s trading system. That is the lowest level for a benchmark 10-year note since July 2010.

The government may start selling a new sovereign security maturing in 2023 this month, according to two finance ministry officials with direct knowledge of the matter who asked not to be identified before a public announcement.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose six basis points, or 0.06 percentage point, to 8.33 percent.

Three-month onshore rupee forwards traded at 55.95 per dollar, compared with 55.59 on May 10, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.77 versus 55.57. 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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