Indian Rupee Drops a Second Day as Inflation Exceeds Estimate

India’s rupee weakened a second day on concern inflation that exceeded economists’ estimates will erode returns from the nation’s assets.

Wholesale prices rose 5.7 percent in March from a year earlier, compared with 4.68 percent in February and the 5.3 percent median forecast in a Bloomberg survey. Figures to be released after market hours today will show consumer-price gains quickened to 8.25 percent from 8.10 percent, according to a separate survey. The rupee also fell after an April 11 report showed factory output shrank.

“Wholesale inflation is above market consensus and that is weighing on the rupee,” said Subramanian Sharma, a director at Greenback Forex Services Pvt. in Mumbai. “The industrial production data have not been supportive for the currency.”

The rupee declined 0.1 percent from April 11 to 60.2325 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. India’s financial markets were closed yesterday for a local holiday.

Industrial production contracted 1.9 percent in February from a year earlier, missing a median estimate for a 0.9 percent expansion in a Bloomberg survey, data released after the close of trading on April 11 showed.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, climbed 33 basis points, or 0.33 percentage point, today to 10.1175 percent.

Three-month offshore non-deliverable forwards on the rupee advanced 0.2 percent to 61.49 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the greenback.

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