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India’s rupee fell to the lowest level in more than three weeks after central bank Governor Duvvuri Subbarao said the nation’s current-account deficit is set to widen from a record. Bonds declined.
The shortfall in the fiscal year through March is expected to be “significantly higher” than the previous period’s 4.2 percent of gross domestic product, Subbarao said in Mumbai yesterday. The rupee may become more vulnerable to the deficit should fund inflows into Indian stocks slow, according to IDBI Federal Life Insurance Co. Foreigners bought a net $3.3 billion of local stocks this month through Feb. 8, exchange data show.
“Currently, the rupee is only supported by inflows,” said Aneesh Srivastava, chief investment officer in Mumbai at IDBI Federal. “Any sort of risk aversion will cause outflows and hit the currency hard.”
The rupee declined 0.1 percent to 53.9250 per dollar as of 9:35 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 54.0125 earlier, the lowest level since Jan. 18. One- month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose one basis point, or 0.01 percentage point, to 9.23 percent. Markets in China, Hong Kong, Taiwan, Singapore and Malaysia are closed today for the Lunar New Year holiday.
Group-of-Seven nations are considering releasing a statement on exchange rates this week to calm concern that the world is on the brink of a currency war, three officials from the countries said. The international finance group is looking to release it before the G-20 meeting in Moscow.
India’s industrial production grew 1 percent in December from a year earlier, after contracting 0.1 percent the previous month, according to the median of 29 estimates in a Bloomberg survey before data due 11 a.m. in New Delhi today.
Inflation probably slowed to a three-year low of 6.97 percent in January, another Bloomberg survey showed before data due Feb. 14. The pace of price gains, which was 7.18 percent in December, is still high, Governor Subbarao said yesterday.
The yield on the 8.15 percent bonds due June 2022 was 7.87 percent today, compared with 7.86 percent yesterday, according to the central bank’s trading system.
Three-month onshore rupee forwards traded at 54.97 per dollar, compared with 54.72 yesterday, according to data compiled by Bloomberg. Offshore non-deliverable contracts were at 54.73 versus 54.61. 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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