India’s rupee completed its biggest weekly drop since June after the nation’s central bank, the Federal Reserve and the European Central Bank refrained from announcing fresh measures to spur growth.
ECB President Mario Draghi declined to intervene in debt markets yesterday, while a day earlier the Fed signaled its readiness to support the world’s largest economy even as it held back from adding to bond purchases. The Reserve Bank of India kept borrowing costs unchanged on July 31. The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 0.1 percent this week.
“Triple disappointments for risk traders would be a hard pill to swallow,” analysts at Edelweiss Financial Advisors Ltd., including Mumbai-based Vinay Khattar, wrote in a research report released today. “The rupee will continue to face resistance from a stronger dollar.”
The rupee declined 0.7 percent this week to 55.7550 per dollar in Mumbai, the biggest drop since the five days through June 22, according to data compiled by Bloomberg. The currency strengthened 0.1 percent today, after earlier falling as low as 56.1900, the weakest level since July 25.
One-month implied volatility, a measure of exchange-rate swings used to price options, fell 10 basis points, or 0.10 percentage point, to 11.30 percent today. It declined 20 basis points this week.
RBI Governor Duvvuri Subbarao kept the benchmark repurchase rate at 8 percent this week, raised the monetary authority’s inflation forecast for the year through March 2013 to 7 percent from 6.5 percent, and lowered the growth estimate to 6.5 percent from 7.3 percent.
Three-month onshore rupee forwards traded at 56.76 per dollar, compared with 56.81 yesterday, and offshore non- deliverable contracts were at 56.77 from 56.88. 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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