Foreign Pullback Sends Rupee to Its Worst Week Since February

  • Currency could drop more as risk sentiment weak: India Forex
  • India sells 150 billion rupees of bonds as planned on Friday

The rupee posted its biggest weekly decline since February as foreign funds sold Indian assets amid talk of an increase in interest rates by the Federal Reserve as early as next month.

Overseas investors sold a net $114.16 million of local shares this week through Thursday, halting three weeks of purchases, data compiled by Bloomberg show. Holdings of rupee-denominated debt fell by 750 million rupees ($11.3 million) in the first four days. Atlanta Fed President Dennis Lockhart earlier in the week called a June rate increase “a real option,” while San Francisco’s John Williams said he would support such a move at the next meeting provided the U.S. economy stayed on track.

“The risk-on sentiment changed direction” given the commentary by some of the Fed officials, said Abhishek Goenka, chief executive officer at India Forex Advisors Pvt. in Mumbai. “We are not very gung-ho on inflows as risk sentiment may not be very strong.”

The Indian currency slipped 0.3 percent from April 29 and was steady on Friday at 66.5550 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The weekly drop is the biggest since the period ended Feb. 19. The rupee has weakened 0.6 percent this year in Asia’s worst performance.

U.S. jobs data due Friday will help shape the outlook for U.S. interest rates. India Forex Advisors expects the rupee to weaken to 67.50 a dollar over the next one-and-a-half months, Goenka said. The S&P BSE Sensex index, India’s benchmark equity gauge, completed its first weekly drop in three.

Sovereign bonds were steady, with the yield on notes due January 2026 little changed from April 29 at 7.44 percent, according to prices from the central bank’s trading system. India sold 150 billion rupees of government debt as planned..

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