Rupee Slides With Indian Bonds as Fed Hike Raises Outflow Risk

How the Fed's Rate Hike Impacts the Rest of the World

The rupee headed for its biggest loss in a month on concern outflows from Indian assets will accelerate after the Federal Reserve raised interest rates and forecast a steeper path for borrowing costs in 2017.

The Indian currency dropped 0.6 percent, the most since Nov. 15, to 67.8150 per dollar as of 9:06 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. The yield on sovereign bonds due September 2026 jumped five basis points to 6.45 percent, halting a two-day gain for the securities.

Foreign holdings of Indian government and corporate bonds have dropped by 377 billion rupees ($5.6 billion) this quarter, National Securities Depository Ltd. data compiled by Bloomberg show. Overseas investors have withdrawn a net $3.3 billion from local shares in the period. The U.S. central bank said inflation expectations have increased “considerably” and suggested the labor market is tightening.

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