Bloomberg News

Indian Rupee Has Worst Quarter Since 2008 on Europe Debt Concern

September 29, 2011

Sept. 29 (Bloomberg) -- India’s rupee completed the biggest quarterly drop since 2008 on concern investors will sell emerging-market assets as Europe’s policy makers struggle to stem the region’s debt crisis.

The currency dropped the most in a week today as exchange data showed global funds pulled a total $5.6 billion this month from the stock markets of India, Indonesia, South Korea, Taiwan and Thailand. India’s currency and bond markets will remain shut tomorrow as local banks close accounts at the end of the first half of the financial year. Global investors anticipate Europe’s crisis leading to an economic slump, financial meltdown and social unrest in the next year, a Bloomberg survey found.

“Till more clarity emerges from the euro zone, we will see bouts of risk aversion where currencies like the rupee are sold off,” said J. Moses Harding, Mumbai-based executive vice president at IndusInd Bank Ltd. “What we are seeing is a classic case of ‘buy the rumor, sell the fact’.”

The rupee weakened 8.8 percent this quarter to 48.9725 at the 5 p.m. close in Mumbai, the biggest drop since the collapse of Lehman Brothers Holdings Inc. in September 2008, according to data compiled by Bloomberg. It fell 0.5 percent today, the most since Sept. 22.

India’s food inflation accelerated for the first time in four weeks, a government report showed. An index measuring wholesale prices of agricultural products gained 9.13 percent in the week ended Sept. 17 from a year earlier, the commerce ministry said in a statement in New Delhi. It rose 8.84 percent the previous week.

Offshore forwards indicate the rupee will trade at 49.68 to the dollar in three months, compared with expectations for a rate of 49.43 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

--Editor: Anil Varma

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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