Bloomberg News

Indian Rupee Drops a Second Day Before Foreign Investment Debate

December 03, 2012

India’s rupee weakened for a second day as U.S. budget talks remained deadlocked and before local lawmakers debate measures to allow more overseas investment.

India’s parliament will start discussing today a decision to allow foreign companies to open supermarkets in the country. House Republicans rejected President Barack Obama’s demand for higher taxes, heightening the confrontational tone of negotiations that are seeking to avoid the so-called fiscal cliff of $607 billion of tax increases and spending cuts set to take effect in January. A report showed U.S. manufacturing unexpectedly contracted last month.

The rupee “would need strong political consensus on reforms and the Reserve Bank of India’s growth-supportive monetary policy to get into bullish mode,” said J. Moses Harding, executive vice president at IndusInd Bank Ltd. in Mumbai.

The rupee declined 0.2 percent to 54.8750 per dollar as of 9:38 a.m. in Mumbai, according to data compiled by Bloomberg. That followed a 0.9 percent decline yesterday. One-month implied volatility, a measure of expected moves in exchange-rates used to price options, was steady at 10 percent.

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 RBI has kept its benchmark repurchase rate at 8 percent since April, citing price pressures. The monetary authority is next scheduled to review policy on Dec. 18.

Three-month onshore rupee forwards traded at 55.78 per dollar, compared with 55.50 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 55.71 versus 55.48. 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


Too Cool for Crisis Management
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus