- S&P BSE Sensex index of shares halts two-day advance
- Fed officials still see higher U.S. interest rates this year
India’s rupee fell from a one-month high as local stocks retreated and Federal Reserve officials argued that an increase in U.S. interest rates is still warranted this year.
The rupee fell 0.1 percent to 65.7450 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It climbed 1.2 percent to 65.6750 on Friday, the highest level since Aug. 20, after the Fed refrained from tightening policy citing global growth concern and turbulent financial markets. The S&P BSE Sensex index of Indian shares slid 0.1 percent, halting a two-day gain, as stocks across Asia declined after a selloff in U.S. equities Friday.
“The rupee is moving in tandem with stocks, which are down tracking global markets,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd. “There is a growing market consensus for Fed action in December.”
Over the weekend, three U.S. policy makers separately explained their rationale for supporting an increase in borrowing costs at one of the Fed’s two remaining meetings of 2015. Higher rates in the world’s largest economy will reduce the allure of emerging markets like India.
The yield on Indian sovereign bonds due May 2025 was steady at 7.70 percent, according to prices from the central bank’s trading system. It slid six basis points Friday on speculation the Fed’s decision will pave the way for the Reserve Bank of India to lower benchmark rates for a fourth time this year.
“India obviously does need cuts but to what extent, I think, is a prerogative of the central bank and they will factor in all these concerns,” Finance Minister Arun Jaitley said in an interview with Bloomberg Television in Hong Kong. The RBI next reviews policy on Sept. 29.