India’s rupee fell the most in two months as China’s move to devalue the yuan drove Asian currencies lower.
The People’s Bank of China slashed the yuan’s daily reference rate Tuesday by a record 1.9 percent, following data that showed exports shrank 8.3 percent from a year earlier in dollar terms in July. That compared with a 1.5 percent decline estimated in a Bloomberg survey. Other nations in the region may be pressured to weaken their exchange rates to keep overseas shipments competitive, according to RBL Bank Ltd.
The rupee fell 0.5 percent to 64.2050 a dollar in Mumbai, matching its June 8 drop, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a gauge of expected swings used to price options, rose 74 basis points to 6.34 percent, data compiled by Bloomberg show.
“The rupee’s weakness is a reflection of China’s yuan depreciation,” said Rohan Lasrado, head of foreign-exchange trading at RBL Bank in Mumbai.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 major currencies excluding Japan’s yen, retreated 1.6 percent. The yuan slumped 1.8 percent to 6.3231 a dollar in Shanghai. The PBOC had been supporting the currency to deter capital outflows and encourage greater global usage as it pushes for official reserve status at the International Monetary Fund.
The yield on Indian sovereign bonds due May 2025 climbed one basis point to 7.80 percent in Mumbai, according to the Reserve Bank of India’s trading system. It ended at a one-month low on Monday amid speculation the slide in oil will help slow consumer-price gains from June’s nine-month high.