Bloomberg News

Rupee Drops on Speculation Importers Increased Dollar Purchases

June 26, 2012

India’s rupee fell toward a record low on speculation oil importers stepped up purchases of dollars to pay month-end bills.

The rupee’s 11 percent decline this quarter has pushed up costs for refiners as Asia’s third-largest economy meets almost 80 percent of its oil needs from imports. India’s raising of the amount of government bonds foreigners can hold by $5 billion yesterday failed to arrest the currency’s slide. Global funds sold $99 million more local stocks than they bought last week, the most since May, exchange data show.

“Month-end dollar demand is strengthening and the rupee is under some pressure,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd. in Mumbai. “Weakness in the rupee may persist for a few days.”

The rupee declined to 57.035 per dollar at the 5 p.m. close in Mumbai, from 57.015 yesterday, according to data compiled by Bloomberg. The currency has dropped 7 percent in 2012, the worst performance among the 10 most-traded Asian currencies. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 12.35 percent.

Three-month offshore non-deliverable forwards traded at 58.21 per dollar, compared with 58.20 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

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


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