Rupee Weakens Toward Record Low as India Outflows Accelerate

  • Foreign holdings of local stocks and bonds declining
  • Currency is the second-worst performer in Asia this month

The rupee weakened past 68 per dollar for the first time since September 2013, falling toward its record low, as the selloff in emerging markets saps demand for Indian assets.

Global funds sold a net $714 million of local shares in the four days through Jan. 19, taking withdrawals for the month to $1.2 billion, the latest exchange data compiled by Bloomberg show. Foreign holdings of rupee-denominated debt fell in each of the last four days, the longest stretch in a month. A gauge of Asian equities tumbled to a three-year low Wednesday amid China’s market turmoil and waning investor confidence about global growth.

The rupee weakened 0.5 percent to close at 67.9650 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It fell to 68.1675 earlier, within 1 percent of its record low of 68.845 reached in August 2013. State-run lenders sold dollars on behalf of the Reserve Bank of India around the 67.90 level on Wednesday, two Mumbai-based traders said, suggesting intervention. An e-mail sent to RBI spokeswoman Alpana Killawala didn’t immediately get a response.

“The rupee is impacted by the broad risk-off sentiment across Asia,” said Rohan Lasrado, the head of foreign-exchange trading at RBL Bank Ltd. in Mumbai. “That may continue for some time as investors fret over growth.”

The benchmark S&P BSE Sensex index of Indian shares slumped 1.7 percent, taking its January loss to 7.9 percent. Sovereign bonds gained, with the yield on notes due May 2025 falling three basis points to 7.75 percent, as the RBI bought 100 billion rupees of debt through its open-market operations.

‘No Panic’

The rupee has declined 2.7 percent this month in Asia’s worst performance after South Korea’s won. India’s currency reserves fell $2.8 billion in the two weeks ended Jan. 8, signaling the RBI is intervening as the rupee extends losses after capping a fifth straight annual decline in 2015.

“India’s economic fundamentals are in much better shape when compared to 2013,” said Amit Agrawal, a currency strategist at Societe Generale SA in Bengaluru. “There’s nothing to panic about as the rupee has come under pressure due to the emerging-market selloff triggered by the developments in China.”

Agrawal said he expects the currency to strengthen to 67.20 by March 31.

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