Bloomberg News

India’s Rupee Drops on Concern Europe’s Woes to Damp Exports

October 04, 2011

Oct. 4 (Bloomberg) -- India’s rupee dropped for a third day on concern Europe’s debt crisis will damp demand for exports from Asia’s third-biggest economy.

Annual growth in overseas shipments slumped to 44 percent in August from 82 percent in July, government data showed yesterday. The nation’s current account, a broad measure of trade and investment flows, showed a deficit of $14.1 billion in the three months ended June, compared with a shortfall of $5.4 billion the prior quarter, the central bank said last week. The MSCI Asia-Pacific Index of shares fell after European governments signaled that bond holders may have to take bigger losses on Greek debt.

“The euro zone is slowly losing hope and they will have to cut interest rates,” said J. Moses Harding, a Mumbai-based vice-president at IndusInd Bank Ltd. “That will benefit the dollar and pressure the rupee. Growth concerns also remain.”

The rupee weakened 0.5 percent to 49.40 per dollar at the 5 p.m. close in Mumbai, the biggest loss since Sept. 22, according to data compiled by Bloomberg. It has dropped 9.5 percent so far this year, the worst performance among Asia’s 10 most-traded currencies.

Offshore forwards indicate the rupee will trade at 50.05 to the dollar in three months, compared with expectations for a rate of 49.93 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

--Editor: Sam Nagarajan

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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