India’s Rupee Declines as Dollar Buying Seen Countering Inflows

India’s rupee dropped as inflows into the nation’s stocks and bonds were countered by speculation importers will buy dollars to pay month-end bills.

The currency fell 0.04 percent to 61.9850 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. It fluctuated between 61.9050 and 62.06 earlier. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, slid seven basis points, or 0.07 percentage point, to 7.70 percent, according to data compiled by Bloomberg. Financial markets are shut tomorrow for a holiday.

“Month-end dollar demand is likely to keep the rupee under pressure,” analysts at Edelweiss Securities Ltd., including Vinay Khattar in Mumbai, wrote in a research note to clients today.

Global funds have added $1.7 billion to holdings of Indian local-currency debt and shares this month, exchange data show. Data on U.S. mortgage applications and new home sales in January is due today and Federal Reserve Chairman Janet Yellen will testify before the U.S. Senate on monetary policy tomorrow.

Yellen said this month that only a notable change to the U.S. outlook would prompt policy makers to slow the pace of cuts to its stimulatory bond-buying program that has boosted inflows into emerging markets.

Three-month offshore non-deliverable forwards fell 0.2 percent to 63.13 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

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