India’s Rupee Has Second Weekly Drop on U.S., Europe Concerns

India’s rupee completed a second weekly decline on concern potential tax increases and spending cuts in the U.S. and a delay in resolving Europe’s debt crisis will slow global growth.

U.S. President Barack Obama faces the so-called fiscal cliff involving $600 billion of expiring tax cuts and automatic spending reductions unless Congress acts before 2013. Euro-area finance ministers may not make a decision on unlocking funds for Greece until late November as they await a full report on the country’s compliance with the terms of its bailout, a European Union official said yesterday. Investors will also be watching the Indian government’s efforts to improve public finances, according to Alpari Financial Services India Ltd.

“The rupee is expected to remain volatile during the session on risk aversion in major markets and policy reforms in domestic markets,” Pramit Brahmbhatt, Mumbai-based chief executive officer at Alpari Financial, wrote in a e-mail today. “The U.S. fiscal cliff and weak EU sentiment continue to dominate headlines.”

The rupee declined 1.7 percent this week to 54.7550 per dollar in Mumbai, according to data compiled by Bloomberg. The currency touched 54.7775 intraday, the lowest level since Sept. 14. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 10 basis points, or 0.10 percentage point, to 10.10 percent. The rate gained 10 basis points this week. The MSCI Asia Pacific Index of shares lost 0.3 percent today.

India’s auction of wireless spectrum, reclaimed after a corruption probe into the award of licenses, may raise 53 percent of the government’s target as prices deter billionaires from Russia to Malaysia, according to an average estimate of five analysts surveyed by Bloomberg.

Three-month onshore rupee forwards were at 55.64 per dollar, compared with 55.45 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.58 versus 55.37. 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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