Rupee Weakens to One-Month Low as Indian Shares Extend Losses

  • Foreign holdings of local-currency bonds declined last week
  • Rupee could drop further as Fed liftoff nears: Religare

India’s rupee fell to a one-month low as losses in local stocks deepened and foreign holdings of the nation’s bonds declined.

The benchmark S&P BSE Sensex of shares retreated for a sixth day, the longest losing run since June, while outflows from rupee-denominated debt were the biggest in seven weeks in the five days ended Oct. 30. The Federal Reserve last week pivoted toward a December increase in U.S. interest rates as policy makers dropped a reference to global risks and asserted that economic growth remains “moderate.”

“The rupee seems to be tracking the decline in stocks,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. Investors are also concerned that the allure of Indian assets will dim as the Fed moves toward a December liftoff, he said.

The rupee weakened 0.5 percent to 65.5850 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. It fell to 65.62 earlier, the lowest level since Oct. 1. The currency declined 0.7 percent last week as global holdings of bonds dropped 8.3 billion rupees ($126 million), according to data from the National Security Depository Ltd.

The yield on 10-year sovereign notes fell one basis point to 7.63 percent, prices from the Reserve Bank of India’s trading system show. It climbed 10 basis points last month in its biggest advance since June. The Sensex lost 0.4 percent on Monday.

DSP BlackRock Investment Managers Pvt, a unit of the world’s largest money manager, predicts the 10-year yield will climb as high as 7.70 percent by Dec. 31 as rising food costs lead to faster inflation and curb the central bank’s ability to add to this year’s 125 basis points of reduction in benchmark borrowing costs.

Before it's here, it's on the Bloomberg Terminal.