India’s rupee weakened, snapping a three-day rally, on speculation importers stepped up purchases of dollars to take advantage of the currency’s ascent to a three-week high.
The rupee surged 2.3 percent against the greenback last week, the most since June, according to data compiled by Bloomberg. India’s economy expanded 5.3 percent in the three months through September from a year earlier, matching the pace in the first quarter that was the slowest since 2009, official data showed Nov. 30.
“The moves seem to be importers buying dollars,” said Naveen Raghuvanshi, a trader at Development Credit Bank Ltd. (DEVB) in Mumbai.
The rupee declined 0.9 percent to 54.7650 per dollar in Mumbai, the biggest drop since Nov. 5, according to data compiled by Bloomberg. It touched 54.2450 earlier today, the strongest level since Nov. 7. One-month implied volatility, a measure of expected moves in exchange-rates used to price options, was steady at 10 percent.
India’s $1.8 trillion economy will grow 5.4 percent in the year through March, Morgan Stanley economists, including Hong Kong-based Chetan Ahya, wrote in a research report today. That compared with their earlier estimate of 5.1 percent and would be the slowest pace in a decade.
Foreign funds pumped $607 million into Indian stocks last week through Nov. 29, taking November inflows to $1.7 billion, exchange data show.
Three-month onshore rupee forwards traded at 55.50 per dollar, compared with 55.22 on Nov. 30, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.48 versus 55.26. 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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