India’s rupee completed its biggest weekly drop since April on speculation importers stepped up dollar purchases to pay month-end bills amid U.S. economic data that backed the case for higher interest rates.
A gauge of dollar strength rose for a fifth week and volatility in the rupee increased after reports Thursday showed an index of U.S. leading economic indicators climbed more than forecast in June and jobless claims slumped to the lowest level in four decades. Economists see a 50 percent chance of a Federal Reserve liftoff in September, a move that would reduce the allure of emerging-market assets. Indian bonds gained this week.
The rupee weakened 0.9 percent from July 17, the most since the five days ended April 24, to 64.0425 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It dropped 0.4 percent on Friday. One-month implied volatility, a gauge of expected swings used to price options, jumped 77 basis points this week to 5.65 percent.
“Month-end dollar demand, especially from oil importers, is a major factor weighing on the rupee,” said Rohan Lasrado, head of foreign-exchange trading at RBL Bank Ltd. in Mumbai. “Also, Asian currencies in general have been trading weak.”
Indian sovereign bonds were little changed this week, with the 10-year yield steady at 7.83 percent, according to prices from the Reserve Bank of India’s trading system. It gained three basis points on Friday.