India’s rupee completed its third monthly drop, the longest losing streak since 2013, after global funds sold the nation’s assets amid speculation the Federal Reserve is moving closer to raising interest rates.
Overseas investors sold a net $1.8 billion of Indian stocks and bonds in May, data compiled by Bloomberg show. A gauge of the U.S. dollar’s strength rose 2.2 percent this month as Fed Chair Janet Yellen said that “it will be appropriate at some point this year” to start increasing rates if the economy continues to improve as expected. India’s exports fell for a fifth month in April, the longest such stretch since 2012.
The rupee weakened 0.6 percent from April 30 to 63.8250 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. The currency, which was little changed on Friday, has lost 1.2 percent in 2015. Indian sovereign bonds rose in May, snapping a three-month drop.
“The broad trend will be a slow depreciation in the rupee,” said Anindya Banerjee, assistant vice-president for currency derivatives at Kotak Securities Ltd. in Mumbai. A weaker currency will also help the Reserve Bank of India maintain export competitiveness, he said.
ABN Amro Bank NV expects the rupee to weaken when the Fed starts raising rates. The Dutch lender on May 19 cut its year-end forecast for the currency to 65 a dollar from 64.
Government bonds rose before a central bank policy review on June 2, when 25 of 31 economists surveyed by Bloomberg predict Governor Raghuram Rajan will reduce interest rates for a third time this year. The yield on the notes due July 2024, the current 10-year benchmark, declined four basis points, or 0.04 percentage point, this month and on Friday to 7.82 percent, according to prices from the RBI’s trading system.
The yield on the debt due May 2025, the new 10-year security issued last week, fell one basis point to 7.64 percent on Friday. Rajan has cut the benchmark repurchase rate by 50 basis points this year to 7.50 percent.
Asia’s third-largest economy probably expanded 7.3 percent in the January-March quarter from a year earlier, a Bloomberg survey showed before data due after the close of markets Friday.