India’s rupee fell toward a two-month low on concern U.S. tax increases and spending cuts due next year will hurt the world’s largest economy, aggravating a global slowdown, unless policy makers defer or scale back the measures.
Re-elected President Barack Obama faces the so-called fiscal cliff of expiring tax reductions and $1.2 trillion in automatic spending decreases, unless Congress acts before then, while seeking to support an economic recovery. Indian exporters will probably step up dollar sales as the rupee approaches the 55 per dollar level, curbing declines in the local currency, according to Edelweiss Financial Advisors Ltd.
“There’s concern whether the lingering problems, such as the fiscal cliff, can be taken care of,” said Ravi Ranjit, chief manager at Federal Bank Ltd. (FB) in Mumbai. “I think concerns are now in the price and the dollar’s rally will be capped.”
The rupee declined 0.3 percent to 54.3750 per dollar in Mumbai, according to data compiled by Bloomberg. It fell to 54.6750 earlier, approaching a Nov. 6 level of 54.7750 that was the lowest since Sept. 14. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 10 basis points, or 0.10 percentage point, to 10.20 percent.
The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 0.1 percent, adding to a 0.2 percent advance yesterday.
Three-month onshore rupee forwards were at 55.45 per dollar, compared with 54.97 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.37 versus 54.96. 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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