Indian Rupee Declines as Foreign Funds Sell Stocks Before Fed

  • Global funds have been net sellers of shares for 10 of 11 days
  • Ten-year sovereign bond yield little changed at 7.76%

India’s rupee declined amid outflows from local stocks ahead of the Federal Reserve’s rate-setting meeting.

Global funds have been net sellers in 10 of the last 11 days, withdrawing $891 million of shares in September, the latest Bloomberg-compiled data show. That’s taken outflows for the quarter to $2.6 billion, the most since 2008. Traders have held odds at 28 percent that the Fed will raise U.S. borrowing costs at its Sept. 16-17 meeting, a move that will reduce the allure of emerging markets.

“There’s caution ahead of the Fed meeting but expectations are that a rate increase could be moved to December,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. “Apart from the rate action, markets will be focusing on the Fed’s commentary.”

The rupee fell 0.1 percent to 66.3650 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency fell to 66.4725 in intraday trading. It has declined 4.1 percent this quarter. The currency sank to a record 68.845 a dollar in August 2013 after the Fed’s signal to end its bond purchases triggered an exodus of funds from developing markets.

The yield on the 10-year bond was little changed at 7.76 percent, prices from the central bank’s trading system show. India’s two main inflation gauges showed continued easing, according to separate reports on Monday, adding pressure on Reserve Bank of India Governor Raghuram Rajan to cut interest rates for a fourth time this year.

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