India’s rupee fell to 57 per dollar for the first time in almost a year as Asian stocks fell amid concern the Federal Reserve will rein in asset purchases that fueled fund flows into emerging markets.
The currency traded within 0.8 percent of a record low as the MSCI Asia Pacific Index of shares slid 1.1 percent. Dallas Fed President Richard Fisher reiterated yesterday in a BNN Television interview that he would have prefered U.S. policy makers to have started scaling back asset purchases. India’s decision yesterday to increase a tax on gold imports hasn’t influenced the rupee’s exchange rate today because the measure was already expected by investors, according to Andhra Bank. (ANDB)
“Speculation that the Fed’s quantitative easing will be tapered off is bad news for emerging markets,” said Vikas Babu, a trader at state-run Andhra Bank in Mumbai. “The gold curbs have been spoken about for a while, so the increase has been discounted by the market.”
The rupee depreciated 0.2 percent to 56.8500 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 57 earlier, the weakest since June 28, 2012. The Reserve Bank of India may sell dollars to slow the rupee’s slide as the local currency approaches an all-time low of 57.3275 touched on June 22, 2012, according to Babu.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, jumped 31 basis points, or 0.31 percentage point, to 9.08 percent.
U.S. companies hired fewer workers than projected in May, according to an ADP Research Institute report yesterday, while data released separately showed service industries and factory orders in the world’s largest economy expanded.
India, the world’s largest gold buyer, increased import duty on gold to 8 percent from 6 percent to rein in a record current-account deficit at a time when the World Gold Council predicts record quarterly demand for the metal in the country.
The curbs will have a “short-term” positive impact on the rupee, Societe Generale strategist Wee-Khoon Chong wrote in a research note today.
Three-month onshore rupee forwards traded at 57.77 per dollar, compared with 57.65 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 57.78 versus 57.69. 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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