India’s Rupee Drops for Second Day on Export Slump, Fed Outlook

India’s rupee retreated for a second day after the nation’s exports fell for a ninth month and amid investor caution before the Federal Reserve’s rate-setting meeting.

Overseas shipments shrank 21 percent from a year earlier in August, official data showed after markets closed Tuesday. The run of declines is the longest since 2009. Traders give a 32 percent chance the Fed will raise interest rates for the first time since 2006 on Thursday, a move that would reduce the appeal of assets in emerging markets such as India. Currency and bond markets in India will be shut Thursday for a public holiday.

“The trade report isn’t supportive of the rupee,” said Sajal Gupta, head of foreign exchange and rates at Edelweiss Securities Ltd. in Mumbai. “There is some nervousness ahead of the Fed meeting. People who are unhedged would like to have some protection before the event.”

The rupee fell 0.1 percent to 66.46 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency slumped 3.5 percent in August, the biggest drop in two years. It sank to a record 68.845 a dollar in August 2013 after the Fed signaled an end to its bond purchases, triggering an exodus of funds from developing markets.

India’s current-account deficit widened to $6.2 billion in the April-June quarter, from $1.3 billion in the preceding three months, the Reserve Bank of India said Sept. 11.

The yield on 10-year government bonds was little changed at 7.75 percent, prices from the central bank’s trading system show.

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