Bloomberg News

India’s Rupee Little Changed Amid European Debt-Crisis Concern

December 20, 2011

Dec. 20 (Bloomberg) -- India’s rupee was little changed, holding this week’s losses, on concern Europe’s debt crisis will worsen and damp demand for the nation’s assets.

The BSE India Sensitive Index fell for a fifth day. The guage sank to a 28-month low after global funds pulled $233 million from Indian stocks last week and $75 million on Monday, exchange data show. European Central Bank President Mario Draghi said yesterday substantial risks to the economy remain and the law forbids him from increasing government bond purchases to fight the crisis.

“The European concerns are here to stay until we have something more concrete from the policy makers there,” said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai. “The market is also quite illiquid as there is no speculative money, so we have to expect sharp moves.”

The rupee was little changed at 52.89 a dollar in Mumbai, compared with 52.885 yesterday, according to data compiled by Bloomberg. It has declined 0.3 percent this week after reaching a record low of 54.3050 on Dec. 15. The currency rallied 1.7 percent on Dec. 16 as the central bank announced measures to curb speculation.

The Reserve Bank of India said last week companies can’t enter into multiple forward contracts to cover a single overseas transaction, and allowed microfinance lenders easier access to overseas funding, according to statements on the monetary authority’s website. India plans to ease restrictions on overseas borrowing and allow companies to raise dollar loans at higher costs, two government officials with direct knowledge of the matter said yesterday.

Offshore forwards indicate the rupee will trade at 54.27 to the dollar in three months, compared with expectations for a rate of 54.06 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

--Editors: Andrew Janes, Sandy Hendry

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

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


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