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India’s Rupee Weakens to One-Month Low Over Deficit Concerns

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Jan. 7 (Bloomberg) -- India’s rupee fell to the weakest level in more than a month on concern a record current account deficit will pressure the currency.

The widest measure of trade was $22.3 billion in the quarter ended Sept. 30, according to central bank data published on Dec. 31. The BSE India Sensitive Index of shares fell for the first time in five days.

“The current account deficit will continue to require plenty in the way of foreign direct investment and portfolio inflows to produce a balance of payments surplus and appreciation pressure on the rupee,” Robert-Prior Wandesforde, a Singapore-based economist at Credit Suisse AG wrote in a research note today. “In short, we find it hard to be structurally optimistic about the currency.”

The rupee declined 0.3 percent to 55.2250 per dollar in Mumbai, according to data compiled by Bloomberg. It earlier touched 55.3350 per dollar, the weakest level since Nov. 29. One-month implied volatility, a gauge of expected moves in exchange rates used to price options, fell 10 basis points, or 0.10 percentage point, to 9.70 percent.

Credit Suisse predicts the rupee will decline to 56.5 per dollar by the end of 2013.

Three-month onshore rupee forwards traded at 56.20 per dollar, compared with 56.05 on Jan. 4, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 56.19 versus 56.01. 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: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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