India’s rupee weakened for a second day on concern Europe’s policy makers will be unable to prevent their region’s debt crisis from worsening.
European leaders meet for two days in Brussels from tomorrow and Italian Prime Minister Mario Monti said the talks will be “very difficult.” German Chancellor Angela Merkel yesterday repeated her opposition to common euro-area bonds. The Dollar Index, which tracks the greenback against six major trading partners, rose around 1 percent in the past week as investors sought the perceived safety of the U.S. currency over emerging-market assets.
“The global currency markets will be watching for cues from the European Union summit, which will throw up some statements in the next 48 hours,” analysts at Edelweiss Financial Advisors Ltd., including Mumbai-based head of research Vinay Khattar, wrote in a report today. Merkel “has already pointed out that the summit will be a damp squib,” he wrote.
The rupee declined 0.2 percent to 57.1350 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 57.3275 on June 22, the weakest level on record. The currency has dropped 11 percent this quarter, the worst performance since the three months ended September 1991, and has weakened 7 percent this year. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 25 basis points, or 0.25 basis points, to 12.1 percent.
Merkel told lawmakers in her ruling coalition that she “doesn’t see” shared debt happening in the euro area, Steffen Seibert, her chief spokesman, said in a text message yesterday.
India’s Prime Minister Manmohan Singh will head the finance ministry until a successor to Pranab Mukherjee is appointed, Pankaj Pachauri, communications adviser to the prime minister’s office, said yesterday. Mukherjee resigned as finance minister to vie for the nation’s presidency.
Three-month onshore currency forwards traded at 58.23 per dollar, compared with 58.06 yesterday, and offshore non- deliverable contracts were at 58.29 from 58.21. 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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