Indian rupee declines toward a record low

Mumbai: India's rupee fell for a second day, approaching a record low, before a government report that economists predict will show gross domestic product rose at the slowest pace since 2009.

Asia's third-largest economy probably expanded 6.1 per cent in the first three months of this year, matching the preceding period's pace that was the slowest in 11 quarters, according to the median of 31 estimates in a Bloomberg News survey. The data are due tomorrow. The rupee also weakened after the Bank of Spain said the nation's economy will sink deeper into a recession, fuelling concern Europe's debt crisis will worsen.

"The expectation for the fiscal year through March 2013 is bearish with risk of slippage in GDP growth" in India, J. Moses Harding, executive vice president at IndusInd Bank Ltd. in Mumbai, wrote yesterday. The rupee's may drop "much faster" than other emerging-market currencies, he wrote.

The rupee lost 1 per cent to 56.2325 per dollar in Mumbai. It touched a record low of 56.3875 on May 24 and has lost 6.2 per cent this month in Asia's worst currency performance.

The rupee's one-month implied volatility, a measure of exchange-rate swings used to price options, rose 15 basis points, or 0.15 percentage point, to 13.5 per cent.

Three-month onshore currency forwards traded at 57.13 a dollar, compared with 56.77 yesterday, and offshore non-deliverable contracts were at 57.42 from 56.95. Forwards are agreements to buy or sell assets at a set price and date.