India’s rupee fell to the lowest level in almost three weeks as investors sought the perceived safety of the dollar on concern global growth is slowing.
A report yesterday showed U.S. factory output shrank in August by the most since July 2009 and London-based Markit Economics said today euro-area services and manufacturing contracted more than initially estimated. The Dollar Index, which tracks the greenback against six major trading partners, rose 0.1 percent. The European Central Bank’s Governing Council will decide tomorrow on a bond-buying proposal that President Mario Draghi says is necessary to ensure the euro’s survival.
“Today’s move is largely due to broad-based dollar strength,” said Ashtosh Raina, head of foreign-exchange trading at HDFC Bank Ltd. in Mumbai. “We are also awaiting the outcome of the ECB meeting.”
The rupee declined 0.5 percent to 55.9125 per dollar in Mumbai, the biggest drop since Aug. 14, according to data compiled by Bloomberg. It touched 55.9600 earlier, the weakest level since Aug. 16. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 9.50 percent.
The U.S. Institute for Supply Management’s factory index fell to 49.6 last month from 49.8 in July, the Tempe, Arizona- based group said. Economists in a Bloomberg survey projected a reading of 50, which is the dividing line between expansion and contraction.
Three-month onshore rupee forwards traded at 56.85 per dollar, compared with 56.64 yesterday, and offshore non- deliverable contracts were at 56.86 from 56.55. 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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