India’s Rupee Drops From Three-Month High on U.S. Tapering Bets

India’s rupee fell from a three-month high as U.S. data bolstered the case for more stimulus cuts that would damp inflows to emerging markets.

The U.S. reported better-than-estimated payroll figures on March 7, triggering concern the Federal Reserve will decide next week to further reduce monthly bond purchases to $55 billion. Edelweiss Securities Ltd. recommends Indian importers and exporters should lock in prices to convert most of their overseas earnings before national elections start next month.

The rupee fell 0.3 percent to 61.2725 per dollar as of 10:16 a.m in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 60.9450 on March 7, the strongest level since Dec. 9. Asian currencies also weakened today after China, the world’s second-largest economy, reported an unexpected drop in exports.

“We continue to see pressure building on account of local eco-political instability and continued foreign-fund uncertainty due to U.S. Fed tapering actions,” analysts at Edelweiss Securities, including Vikas Khemani in Mumbai, wrote in a research report today. Technical charts indicate gains in the rupee beyond 60.80 per dollar will be difficult, while a drop past 61.80 presages a plunge to 62.50, they wrote.

American employers added 175,000 jobs in February, the most in three months and higher than the 149,000 estimate in a Bloomberg survey. The Federal Open Market Committee, which meets March 18-19, will continue cutting monthly bond purchases by $10 billion at each meeting, based on a Bloomberg survey of economists in January.

Election Risk

China reported March 8 that exports contracted 18.1 percent in February, the biggest decline since 2009. Economists predicted a 7.5 percent increase.

Indians will start voting April 7 to determine if Prime Minister Manmohan Singh’s ruling party can fight off a resurgent opposition and extend its decade-long rule of the world’s largest democracy. Results will be announced May 16, the Election Commission of India said March 5.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, declined 12 basis points, or 0.12 percentage point, to 8.09 percent.

Three-month offshore non-deliverable forwards fell 0.1 percent to 62.35 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 editors responsible for this story: James Regan at jregan19@bloomberg.net Amit Prakash, Simon Harvey

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