Mumbai: India’s rupee dropped to the lowest level in more than three months as global funds pared holdings of the nation’s debt and US housing data bolstered the dollar.
Overseas investors sold $126.2 million of local-currency notes on April 21, the biggest single-day outflow since March 9, the latest figures show. Sales of previously owned US homes climbed in March to the highest level since September 2013, data showed Wednesday, adding to the case for the Federal Reserve to raise interest rates.
“Foreign flows aren’t supportive at the moment,” said Anindya Banerjee, a currency analyst at Kotak Securities Ltd. in Mumbai. “The rupee will gain if exporters decide to step in and start selling dollars.”
The rupee weakened 0.8 per cent to close at 63.3225 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. It touched 63.3450 earlier, the lowest level since Jan. 7. India’s 10-year sovereign bonds were little changed, with the yield on the 8.4 per cent notes due July 2024 at 7.76 per cent, according to prices from the central bank’s trading system.
India’s currency has declined 1.6 per cent in the past week in Asia’s worst performance. Exports from the nation slumped 21 per cent in March from a year earlier in the biggest drop since 2009, resulting in the trade deficit widening to a four-month high of $11.8 billion, data showed on April 17.
The rupee has “appreciated in real terms and needs to weaken,” an adviser to India’s central bank said in an interview this week.
The Reserve Bank of India would probably favour a further retreat in the rupee to combat the slump in exports, Ashima Goyal, a member of the central bank’s technical advisory panel, which makes policy recommendations to Governor Raghuram Rajan, said in a phone interview on Tuesday. The rupee “needs to weaken to 64 or maybe 65” a dollar this year, she said.
