India’s rupee dropped for a third day after Standard & Poor’s warned the nation may lose its investment-grade credit rating.
The currency touched a one-week low after S&P said in a statement yesterday that slowing growth and political roadblocks threatened India’s BBB- rating, which is one level above junk. A government report due today may show industrial production in April increased less than the 1.7 percent median estimate in a Bloomberg News survey of 37 analysts, according to Bank of Tokyo-Mitsubishi UFJ Ltd. Wholesale prices rose 7.50 percent in May, compared with 7.23 percent in April, according to another Bloomberg survey before data due June 14.
“This week’s data releases will further drive home the dilemma confronting policy makers,” Leong Sook Mei, the Singapore-based regional head of global currency research at Bank of Tokyo-Mitsubishi, wrote in a report today. “The rupee looks vulnerable again,” she wrote, adding that the currency may weaken past 56 per dollar.
The rupee declined 0.1 percent to 55.785 per dollar as of 9:56 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 55.865 earlier, the weakest level since June 5. One- month implied volatility, a measure of exchange-rate swings used to price options, rose 30 basis points, or 0.30 percentage point, to 12 percent.
Three-month onshore currency forwards traded at 56.71 a dollar, compared with 56.67 yesterday, and offshore non- deliverable contracts were at 56.89 from 56.92. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.
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