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Indian Rupee Falls From Two-Week High as Manufacturing PMI Drops

India’s rupee fell from the highest level in two weeks as a drop in a manufacturing gauge sparked concerns about growth in Asia’s third-largest economy.

A purchasing managers’ index released by HSBC Holdings Plc and Markit Economics was at 50.7 in December, lower than November’s 51.3. A figure above 50 indicates expansion. The Reserve Bank of India raised its key interest rate twice last year to rein in the region’s fastest consumer-price gains.

“With monetary policy likely to remain tight and red tape continuing to stifle investment, we doubt growth in Indian manufacturing will accelerate sharply,” Krystal Tan, an economist at Capital Economics Ltd. in Singapore, wrote in a research report today.

The rupee fell 0.6 percent to 62.2675 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 61.7525 earlier, the strongest level since Dec. 17, on speculation foreign investors will add to the net $20 billion of Indian shares they bought last year.

The rupee fell as the S&P BSE Sensex index of shares erased gains. The benchmark dropped 1.2 percent after rising as much as 0.9 percent earlier. Foreign-exchange trading volumes were light due to holidays in several global markets yesterday, according to India Forex Advisors Pvt.

The rupee’s one-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose five basis points, or 0.05 percentage point, to 10.26 percent.

Three-month offshore non-deliverable forwards declined 0.6 percent to 63.51 per dollar, data compiled by Bloomberg show. 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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