India’s rupee fell to the lowest in almost three months on speculation companies increased dollar purchases to settle import bills before the end of the month.
The rupee weakened for a fourth day as offshore forward contracts showed traders increased bets for further weakness in the currency. India’s exports shrank an average 7.7 percent a month last quarter and imports grew 8.5 percent, fueling concern the nation’s current-account deficit will widen from a record.
“The rupee is under pressure because of an increase in dollar demand from importers before the month-end,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “The market is also taking cues from non-deliverable forwards, which are showing a weakening bias for the rupee.”
The rupee declined 0.4 percent to 50.155 per dollar as of 10:10 a.m. in Mumbai, according to data compiled by Bloomberg. It fell to 50.2075 earlier, the lowest since Dec. 2. The currency may slide as low as 50.30 today, Bhatt said.
Offshore contracts indicate traders bet the rupee will trade at 50.42 to the dollar in a month, compared with expectations for a rate of 50.10 yesterday. 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.
The deficit in India’s current account, a broad measure of trade flows, remittances and investment income, increased to $12.5 billion in the quarter to Sept. 30, from $9.8 billion the previous quarter, according to the central bank.
Implied volatility on one-month dollar-rupee options climbed to 13.6 percent, the most since Feb. 18, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices.
Source : Bloomberg.com