Indian Rupee Weakens as U.S. Data Revives Fed Tapering Concern

India’s rupee touched the lowest level in almost a month as better-than-estimated U.S. data revived concern the Federal Reserve will pare stimulus earlier than anticipated. Bonds were steady.

The Institute for Supply Management’s non-manufacturing index increased to 55.4 in October, compared with 54.4 in the previous month and in contrast to a Bloomberg survey prediction of a drop to 54. India’s central bank may cut direct dollar supplies to oil refiners when it stops offering concessional swaps for foreign currency raised by lenders on Nov. 30, according to DBS Bank Ltd.

“While these maneuvers have been priced in, some buoyancy in the dollar versus rupee should be expected when these are eventually unwound,” analysts at DBS, including David Carbon in Singapore, wrote in a research report today. The ISM data has “kept taper hopes alive,” they wrote, adding that markets aren’t factoring in any U.S. interest-rate increases.

The rupee fell 0.4 percent to 61.8600 per dollar as of 9:52 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. The currency touched 62.0100 earlier, the weakest level since Oct. 10. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 36 basis points, or 0.36 percentage point, to 11.25 percent.

The yield on the 7.16 percent government notes due May 2023 was little changed at 8.74 percent, according to prices from the central bank’s trading system. The rate climbed to as much as 8.77 percent earlier.

Three-month onshore rupee forwards fell 0.4 percent to 63.21 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts fell 0.4 percent to 63.56. 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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