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Rupee Forwards Drop to 2-Week Low as Europe Crisis Hurts Growth

India’s rupee forwards fell to the lowest level in almost two weeks on further signs Europe’s debt crisis is hurting growth in Asia’s third-largest economy.

Economists predict that a government report on Aug. 31 will show India’s gross domestic product increased last quarter at the slowest pace in three years. The data comes out the same day as Federal Reserve Chairman Ben S. Bernanke meets with global central bank heads in Jackson Hole, Wyoming.

“The environment is glum,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd. in Mumbai. “The markets seem indecisive and this is likely to continue through the week until the Jackson Hole meeting.”

Twelve-month non-deliverable forwards declined 0.1 percent to 59.22 per dollar, according to data compiled by Bloomberg. The contracts touched 59.34 earlier, the weakest level since Aug. 17. Onshore contracts fell 0.2 percent to 59.19. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

The rupee was little changed in the spot market at 55.6750 per dollar in Mumbai, compared with 55.6900 yesterday, according to data compiled by Bloomberg. It touched 55.8850 earlier, the weakest level since Aug. 16. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 15 basis points, or 0.15 percentage point, to 9.80 percent.

India’s economy grew 5.3 percent in the quarter ended June from a year earlier, according to the median estimate of 34 economists in a Bloomberg News survey. That matches the growth rate in the previous quarter, which was the slowest since the three months through March 2009.

The spot currency pared earlier losses amid speculation The European Central Bank is readying measures to counter the crisis. ECB President Mario Draghi will not go to the Jackson Hole symposium because of the workload foreseen in the next few days, a bank spokesman said in Frankfurt today. The ECB’s Governing Council meets on Sept. 6 and Draghi is expected to announce details of the bank’s new bond-buying program, a proposal that has been criticized by the Bundesbank.

Three-month onshore rupee forwards traded at 56.77 per dollar, compared with 56.69 yesterday, and offshore non-deliverable contracts were at 56.70 from 56.65.

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