India’s Rupee Declines as U.S. Rate Increase Bets Boost Dollar

India’s rupee fell for the first time in four days on concern the Federal Reserve will increase interest rates, reducing the flow of funds to emerging markets.

“Many” participants at the U.S. monetary authority’s July meeting said they might have to raise borrowing costs sooner than anticipated, according to minutes released yesterday. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose to a six-month high today.

“The rupee’s weakness is mainly because of the Fed minutes, which were a tad hawkish,” said Anindya Banerjee, a currency analyst at Kotak Securities Ltd. in Mumbai. “The more hawkish the Fed gets, the more uncomfortable speculators are.”

The currency fell 0.1 percent at the close at 60.6750 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell six basis points, or 0.06 percentage point, to 7.12 percent.

Three-month offshore non-deliverable forwards were little changed at 61.64 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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