India's rupee may decline on signs investors are taking money out of riskier emerging markets as financial institutions worldwide face mounting credit-market losses.
The currency may extend two weeks of losses after data from the nation's capital market regulator showed overseas investors increased sales of local equities. Six of the 10 most-active currencies in Asia outside Japan fell today as Asian stock indexes dropped on speculation demand for the region's assets and exports is falling amid a deepening global economic slump.
"The rupee will face some more uncertainty and volatility in the short term,'' said K.V. Mallik, treasurer at state-owned UCO Bank in Kolkata. ``Outflows from the equity market and import-related payments will keep some pressure on the rupee.''
The rupee was little changed at 50.035 a dollar as of 10 a.m. in Mumbai, according to data compiled by Bloomberg. It touched an all-time low of 50.5925 in intraday trading on Nov. 20. The currency has lost 21 percent this year, the most since 1991.
Implied volatility on one-month dollar-rupee options rose today to 26.4 percent, near the highest this month, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options.
Investors based abroad pulled a record $4.27 billion out of India's equity and debt markets last month as the credit crisis escalated following the collapse of Lehman Brothers Holdings Inc. in September. They sold a record $13.4 billion of shares this year, data provided by the Securities and Exchange Board of India show.
Source : Bloomberg.com