India’s Rupee Weakens for Third Day Before FOMC Meeting EndsKartik Goyal
India’s rupee weakened a third day, touching a 13-month low, on speculation demand for emerging-market assets will suffer as global growth falters and investors prepare for higher U.S. interest rates next year.
The currency pared losses as state-run lenders likely sold dollars on behalf of the Reserve Bank of India, according to three Mumbai-based traders who asked not to be identified. The Federal Open Market Committee ends a two-day meeting today at which the path of increases in borrowing costs will be discussed. The purchasing managers index in Germany and France were weaker than expected, reports showed yesterday, while Bank of England Governor Mark Carney warned that a global slowdown threatens financial stability.
“Investors are cautious ahead of the FOMC meeting on expectations it will give some signal about the rates,” said Navin Raghuvanshi, a currency trader at DCB Bank Ltd. in Mumbai. “The overall global sentiment is not conducive for emerging markets” and year-end dollar demand from local oil companies is also impacting the rupee, he said.
The currency fell 0.1 percent to close at 63.6225 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It earlier fell 0.5 percent to 63.8850, the lowest level since Nov. 13 last year.
The Federal Open Market Committee ends a two-day meeting today. Economists predict plunging oil prices and a currency crisis in Russia won’t stop U.S. policy makers from dropping a vow to keep interest rates low for a “considerable time.”
The yield on Indian sovereign bonds due July 2024 dropped two basis points, or 0.02 percentage point, to 7.97 percent, prices from the RBI’s trading system show. The rate climbed to 8.03 percent earlier.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were little changed at 7.92 percent after earlier rising as high as 7.99 percent earlier, according to data compiled by Bloomberg.
Three-month offshore non-deliverable forwards for the rupee fell 0.3 percent at 64.68 a 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.