Rupee Posts Biggest Weekly Decline Since November on Outflows

  • Foreigners sell Indian stocks after three weeks of purchases
  • India's government sold 140 billion rupees of bonds Friday

India’s rupee completed its biggest weekly decline since November as global funds sold the nation’s stocks amid a surge in volatility.

Investor appetite for riskier assets ebbed as a turmoil in currency and equity markets in China, Asia’s largest economy, spread to the region. Foreign holdings of Indian shares fell $281.5 million in the four days through Thursday, halting a three-week increase.

The rupee weakened 0.7 percent from Jan. 1 to 66.6350 a dollar in Mumbai, the most since the five days ended Nov. 27, prices from local banks compiled by Bloomberg show. The currency, which rose 0.4 percent on Friday, sank 4.7 percent in 2015 to complete a fifth straight annual decline.

“The rupee is reflecting capital outflows and the volatility in China,” said Ankur Jhaveri, co-head of currencies and rates at Edelweiss Financial Services Ltd. in Mumbai. “Another round of yuan devaluation could weigh on the currency.”

China’s yuan sank to a five-year low this week after the central bank signaled it is becoming more tolerant of a depreciating currency as policy makers strive to revive economic growth. That’s spurred speculation of a regional currency war and triggered a rout in Chinese equities, with trading being halted Thursday for a second time this week.

Bond Sale

The rupee’s one-month volatility, a gauge of expected swings used to price options, jumped 50 basis points to 6.13 percent, its biggest weekly increase since August on a closing basis, data compiled by Bloomberg show.

The yield on Indian sovereign bonds due May 2025 rose one basis point from Jan. 1 and was little changed on Friday at 7.74 percent, prices from the Reserve Bank of India’s trading system show. The S&P BSE Sensex index of shares was down 4.7 percent for the week, its steepest loss since November 2011.

India sold 140 billion rupees ($2.1 billion) of notes, including 80 billion rupees of new 10-year debt, at Friday’s auction as planned, according to a central bank statement.

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