Bloomberg News

India Rupee Falls as Fund Outflows Increase on Fed Exit Outlook

June 24, 2013

India’s rupee fell, extending a seven-week slide, after global investors boosted sales of local bonds and stocks on the prospect of the U.S. paring stimulus policies that have boosted dollar supply.

Foreign funds pulled $4.6 billion from Indian debt and shares in June, exchange data show. The nation’s current-account deficit widened to a record of around 5 percent of gross domestic product in the year ended March 31, the government estimates. The Dollar Index, which tracks the greenback against the currencies of six trade partners, rose for a fourth day after the Federal Reserve signaled on June 19 it may taper its bond-buying program this year and end it in 2014.

“Fund flows are going to be volatile given the outlook for the Fed phasing out its stimulus measures,” said Vikas Babu, a trader at state-run Andhra Bank (ANDB) in Mumbai. “So, from the current-account view, the rupee is a bit more vulnerable. Only intervention can curb the rupee’s slide.”

The rupee slid 0.6 percent to 59.645 per dollar as of 10:29 a.m. in Mumbai, according to data compiled by Bloomberg. It touched a record low of 59.98 on June 20. The currency declined 5.3 percent this month, Asia’s worst performance. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, was steady at 12.54 percent.

India is prepared to curb currency volatility, Raghuram Rajan, chief economic adviser at the finance ministry, said in New Delhi on June 20. The dollar’s 14-day relative-strength index against the rupee was at 75.2, above the 70 threshold that signals the greenback’s rally is poised to end.

Three-month onshore rupee forwards dropped 0.7 percent from June 21 to 60.60 per dollar, according to data compiled by Bloomberg. Offshore non-deliverable contracts fell 0.1 percent to 60.77. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporters on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

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


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