Aug. 17 (Bloomberg) - India’s rupee fell the most in 5 1/2 months after a drop in foreign direct investment into China and an unexpected decline in U.S. consumer confidence spurred a slide in regional stocks.
The currency fell to the lowest level in more than a month as the benchmark Bombay Stock Exchange’s Sensitive Index fell the most in six weeks. China today reported foreign direct investment slid for a 10th month in July, dropping 36 percent from a year earlier, triggering the biggest slide in the Shanghai Composite Index since Nov. 18.
“Investors are still not confident economic fundamentals are strong, because of which demand for riskier assets remains weak,” said Naveen Raghuvanshi, a trader at Development Credit Bank Ltd. in Mumbai. “That sentiment is pressuring the rupee, which may persist in coming weeks.”
The rupee fell 1.5 percent, the most since March 2, to 48.965 per dollar at the 5 p.m. close in Mumbai, its weakest since July 13, according to data compiled by Bloomberg. It may slip to 49 this week, Raghuvanshi said.
Overseas investors sold more Indian equities than they bought on all but two of the seven trading days through Aug. 13, exchange data show.
The Reuters/University of Michigan preliminary index of U.S. consumer sentiment decreased to 63.2 this month, the lowest since March, according to a report on Aug. 14. Japan’s gross domestic product expanded at an annual 3.7 percent pace in the three months ended June 30, the government reported today. The median estimates in separate Bloomberg surveys of analysts were for an index of 69 and growth of 3.9 percent.
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India, Asia’s third-largest economy, will seek new customers overseas as recessions in the U.S. and Europe damp demand for the nation’s products, Trade Minister Anand Sharma said today.
“About 60 percent of our traditional export markets are in recession,” Sharma told reporters in New Delhi. India will be looking to expand its markets to “make sure that our exports remain competitive,” he said.
The Trade Ministry will announce more assistance for exporters in a policy statement on Aug. 27, Sharma said. India’s exports dropped 28 percent in June from a year earlier to $12.8 billion, the ninth consecutive monthly decline. Exports plunged 33.3 percent in March, the biggest slump on record, according to Bloomberg data going back to April 1995.
Offshore contracts indicate bets the rupee will trade at 49.08 to the dollar in a month, compared with expectations for a rate of 48.32 on Aug. 14. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Source : Bloomberg.com