India's Rupee Pares Decline as Benchmark Stock Index Cuts Losses

  • Currency dropped as much as 0.5 percent earlier on Thursday
  • Speculation China supporting yuan calmed markets: RBL Bank

India’s rupee pared declines as selling in local stocks abated and on speculation China will be able to stabilize its financial markets.

The currency fell less than 0.1 percent to 66.4350 a dollar in Mumbai on Thursday, paring a drop of as much as 0.5 percent. The S&P BSE Sensex index of shares closed 0.4 percent lower after retreating 1.7 percent intraday. The Chinese yuan was poised for a record surge in the freely-traded offshore market in Hong Kong, spurring speculation China’s central bank intervened to deter bets against its currency. The People’s Bank of China’s move to devalue the yuan on Aug. 11 has roiled emerging markets and led to exchange-rate shifts in Kazakhstan and Vietnam.

“The reversal in stocks contributed to rupee erasing losses,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd.
Speculation that China intervened comforted the markets that there may not be further devaluation, he said.

The rupee dropped earlier Thursday as U.S. jobs data ahead of the Federal Reserve’s Sept. 16-17 meeting boosted the case to raise borrowing costs. The
Bloomberg-JPMorgan Asian Dollar Index traded 0.4 percent higher as of 5:30 p.m. in Mumbai, after sliding as much as 0.2 percent earlier.

“The rupee reacted to the global risk-off and risk-on sentiment,” said Lasrado, adding that Indian markets will remain volatile till the outcome of the Fed meeting.

The benchmark 10-year yield was little changed at 7.77 percent, prices from the central bank’s trading system show.

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