India’s rupee fell toward the lowest level since September as investors favored the U.S. currency on signs the world’s largest economy is recovering.
The Dollar Index, which tracks the greenback against six major trading partners, snapped a two-day loss. The Conference Board’s index of consumer sentiment probably climbed this month to its highest level since November, while the S&P/Case-Shiller measure of property values in 20 cities jumped the most since April 2006, separate Bloomberg surveys of economists show before reports today. The rupee’s losses will be limited by inflows to Indian stocks, according to HDFC Bank Ltd. (HDFCB)
“Today’s depreciation is largely due to the broad dollar strength,” said Ashtosh Raina, Mumbai-based head of foreign-exchange trading at HDFC Bank. “The rupee will likely stay range-bound as inflows are there.”
The currency weakened 0.2 percent to 55.6750 per dollar as of 9:23 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 56.0150 on May 23, the lowest level since Sept. 6, and has dropped 3.4 percent this month.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 15 basis points, or 0.15 percentage point, to 8.99 percent.
The rupee will also be supported by the Reserve Bank of India’s curbs against gold purchases to rein in a record current-account deficit, Raina said. The central bank clarified yesterday that lenders cannot make loans using units of gold exchange-traded funds as collateral. The monetary authority on May 13 limited imports of the metal by banks on a consignment basis to only those required to meet the genuine needs of exporters.
Federal Reserve Chairman Ben S. Bernanke said last week the central bank may cut the pace of its asset purchases, a policy known as quantitative easing, if officials see indications of sustained growth. Overseas funds bought a net $14.5 billion of Indian shares this year as global stimulus measures boosted cash, exchange data show.
Three-month onshore rupee forwards traded at 56.50 per dollar, compared with 56.46 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 56.56 versus 56.45. 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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