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India Rupee Drops Most in 2 Weeks as Fed Taper Bets Boost Dollar

Jan. 21 (Bloomberg) -- India’s rupee fell the most in more than two weeks as investors favored the dollar over emerging-market assets amid speculation the Federal Reserve will cut stimulus further.

The Federal Open Market Committee is due to meet Jan. 28-29 to review policy. Richmond Fed President Jeffrey Lacker said Jan. 17 that the monetary authority, which is cutting its monthly bond purchases by $10 billion to $75 billion starting January, may consider more reductions. The Bloomberg Dollar Index rose to the highest since September today. India’s main share index has dropped 1.1 percent from a Dec. 9 record.

The rupee fell 0.4 percent to 61.8925 per dollar in Mumbai, after rising as much as 0.3 percent earlier, according to prices from local banks compiled by Bloomberg. That’s the biggest decline since Jan. 2.

“Upside in the rupee seems to be limited due to rangebound domestic shares and strength in the dollar overseas,” analysts at Edelweiss Financial Advisors Ltd., including Vinay Khattar in Mumbai, wrote in a research report today. The rupee’s direction will be determined only after it breaks the 61 to 62.5 per dollar range, they wrote.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose three basis points, or 0.03 percentage point, to 8.56 percent.

Three-month offshore non-deliverable forwards fell 0.4 percent to 63.02 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 editor responsible for this story: James Regan at jregan19@bloomberg.net

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