Rupee at Lowest in More Than Two Months as India Outflows Deepen

  • Foreigners are net sellers of Indian stocks, bonds this month
  • Markets to be nervous given impending U.S. rate rise: Religare

Indian rupee fell to the lowest level in more than two months amid signs demand for Indian assets is waning as the Federal Reserve prepares to raise interest rates.

The currency has dropped 2 percent in November, the worst performance in Asia, as global funds withdrew $753 million from local shares. Foreign holdings of rupee-denominated bonds have fallen by 37.2 billion rupees ($558 million), the most since May, data compiled by Bloomberg show. Speculation is mounting that the Fed will boost U.S. rates before the end of the year, with futures showing a 72 percent chance of a move at the Dec. 15-16 meeting.

“Markets will continue to be nervous given the impending rate hike by the Fed,” said Himanshu Arora, a currency analyst at Religare Securities Ltd. in Noida, near New Delhi. The rupee will have a “weakening bias,” he said.

The rupee weakened 0.4 percent to 66.5650 a dollar Thursday, according to prices from local banks compiled by Bloomberg. It dropped to as low as 66.6675 a dollar, the weakest level since Sept. 10. The rupee pared losses as state-run banks were seen selling dollars on behalf of the central bank, according to RBL Bank Ltd.

The yield on India’s 10-year sovereign bonds rose two basis points to 7.72 percent from Tuesday, according to prices from the central bank’s trading system. Local markets were shut Wednesday for a public holiday.

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