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Rupee Drops to 11-Week Low as Importers Boost Dollar Purchases

May 20 (Bloomberg) -- India’s rupee fell to an 11-week low on speculation importers stepped up dollar purchases to pay month-end bills.

The currency extended this month’s loss to 2.4 percent as some companies repaid or refinanced overseas loans raised around the start of the last fiscal year, which began in April 2012, according to Andhra Bank. The Dollar Index, which tracks the greenback against six major counterparts, rose more than 1 percent in each of the last two weeks on bets the Federal Reserve will slow asset purchases, which have fueled fund flows into emerging markets, on signs the U.S. economy is improving.

The rupee declined 0.4 percent to 55.1150 per dollar in Mumbai, according to data compiled by Bloomberg. The currency touched 55.1350 earlier, its weakest since March 4. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose one basis point, or 0.01 percentage point, to 8.48 percent.

“Both importers and exporters” were in the market today, said Vikas Babu, a foreign-exchange trader in Mumbai at state-run Andhra Bank. “Investors will be awaiting Bernanke’s testimony this week” for signals on the prospects of U.S. stimulus policies, he said.

The Fed is buying $85 billion a month of Treasury and mortgage bonds to push down borrowing costs and spur growth. Fed Chairman Ben Bernanke is scheduled to speak to the Joint Economic Committee of Congress on May 22. Minutes of the Fed’s last policy meeting will be released the same day.

Three-month onshore rupee forwards traded at 56.04 per dollar, compared with 55.79 on May 17, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.88 versus 55.94. 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: James Regan at jregan19@bloomberg.net

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