Mumbai: India’s rupee declined for a third day as losses in local stocks deepened amid a global sell-off.
Asian currencies and equities retreated Wednesday as waning investor confidence in the outlook for global growth sapped demand for riskier assets. The benchmark S&P BSE Sensex index of Indian shares fell 1.3 per cent, the most in two weeks. State-run lenders were seen selling the greenback to support the rupee, according to RBL Bank Ltd. Sovereign bonds were steady.
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The rupee weakened 0.1 per cent to 68.0725 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg, taking its slide this year to 2.8 per cent. The currency slipped to 68.26 earlier, near its record low of 68.845 reached in August 2013. Its one-month implied volatility, used to price options, jumped 41 basis points to 6.94 per cent.
“The volatility in the currency market has much to do with external factors,” said Hariprasad MP, senior vice-president and head of treasury at Centrum Direct Ltd. in Mumbai. “The dollar’s strength and capital outflows are adding to the rupee’s weakness.”
A gauge of the US dollar has gained 1 per cent so far in 2016 and global funds have withdrawn a net $1.7 billion (Dh6.24 billion) from Indian stocks. Reserve Bank of India Governor Raghuram Rajan, who kept benchmark interest rates unchanged for a second straight meeting on Tuesday, said later in the day that he wasn’t “too worried” about the current value of the rupee. The RBI has intervened on both sides of the foreign-exchange market, he said at a briefing in Mumbai.
The yield on the bonds due May 2025 was unchanged from 7.85 per cent on Tuesday, which was its highest close since August, according to prices from the central bank’s trading system. That on the notes due January 2026, the new 10-year debt, rose one basis point to 7.73 per cent.
