Bloomberg News

India’s Rupee Falls to Two-Month Low on Economic Growth Concern

November 26, 2012

India’s rupee fell to a two-month low, erasing earlier gains, before a report this week that is forecast to show economic growth will stay near a three-year low.

Asia’s third-largest economy expanded 5.5 percent in the three months through September from a year earlier, Finance Minister Palaniappan Chidambaram predicted on Nov. 24, matching the growth rate in the preceding quarter. Economists forecast a 5.2 percent increase, according to the median estimate in a Bloomberg survey before the data due on Nov. 30. That would match the pace in the first quarter that was the slowest since the three months through March 2009.

The rupee declined 0.2 percent to 55.6250 per dollar as of 10:55 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 55.6750, the weakest level since Sept. 6. One-month implied volatility, a measure of expected moves in exchange- rates used to price options, was unchanged at 9.50 percent.

“The rupee remains the major underperformer, with the currency continuing to suffer from domestic considerations, and benefitting the least from any improvement in risk appetite,” Mitul Kotecha, Hong Kong-based head of foreign-exchange strategy at Credit Agricole, wrote in a research report today.

The rupee had gained as much as 0.2 percent earlier after Chidambaram said in Pune that he’s “optimistic” the fiscal shortfall will amount to 5.3 percent of gross domestic product for the year through March, compared with 5.8 percent last year. U.S. consumers spent 13 percent more during the Thanksgiving weekend than a year earlier, the National Retail Federation said yesterday.

Three-month onshore rupee forwards were at 56.42 per dollar, compared with 56.40 on Nov. 23, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 56.53 versus 56.48. 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: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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