India Rupee Drops to One-Week Low on Importers' Dollar Purchases

India’s rupee fell to a one-week low on speculation importers are stepping up dollar purchases to pay month-end bills.

The currency weakened 0.1 percent in a second day of declines to 65.1275 a dollar in Mumbai, the lowest level at close since Oct. 13, prices from local banks compiled by Bloomberg show. Sovereign bonds were little changed. Local markets will be shut Thursday for a public holiday.

“Dollar demand, especially from oil importers, continues to remain strong ahead of the holiday,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd.

The Reserve Bank of India turned a net seller of dollars for the first time in a year in August, data showed this month, indicating that the central bank stepped in to stabilize the rupee amid volatility triggered by China’s shock devaluation of the yuan and the uncertainty around the timing of a U.S. interest-rate increase.

The rupee has climbed 0.7 percent this month, following a 1.4% jump in September. Its one-month implied volatility, a gauge of expected moves used to price options, rose three basis points 6.37 percent, data compiled by Bloomberg show. The measure has dropped 59 basis points in October and retreated to 6.26 percent on Monday, the lowest since Aug. 12.

Foreign holdings of rupee-denominated bonds have increased 144.2 billion rupees ($2.2 billion) in October after India granted global funds greater access to its debt market, data from the National Security Depository Ltd. show. Overseas investors have also bought a net $719.9 million of Indian shares this month through Oct. 19.

The yield on 10-year government bonds was little changed at 7.58 percent, according to prices from the central bank’s trading system.

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