Rupee Declines Most in Six Months on Dollar Strength, Argentina

India’s rupee fell the most in six months as an improving U.S. economy boosted the dollar and a debt default by Argentina damped demand for riskier assets.

The Bloomberg Dollar Spot Index gained 0.9 percent this week as data showed the U.S. economy expanded at a 4 percent annualized pace last quarter, after a contraction of 2.1 percent in the prior period. Moody’s Investors Service revised Argentina’s sovereign-rating outlook to negative after Standard & Poor’s said the country was in default this week.

“The rupee is tracking the global markets meltdown post the downgrade of Argentina and that is stoking concern there may be outflows,” said Ankur Jhaveri, co-head of currency and rates at Edelweiss Financial Services Ltd. in Mumbai. “When there is uncertainty, that creates nervousness among importers and they are rushing to book hedges for the near term.”

The Indian currency weakened 1 percent to close at 61.1850 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. That’s the biggest drop since Jan. 24. It dropped to as low as 61.1900 in intraday trading, the lowest since April 23, and slid 1.8 percent this week.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, climbed 101 basis points, or 1.01 percentage point, today and 166 basis points from a week ago to 7.27 percent.

Three-month offshore non-deliverable forwards fell 1.4 percent today and 2.4 percent from July 25 to 62.24 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 dollars.

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