BLBG:Rupee Drops to 2-Week Low as Europe Rift Drives Funds to Dollar
India’s rupee dropped to a two-week low as investors sought the relative safety of the dollar after a split emerged among European leaders on a plan to solve the region’s debt crisis.
Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, said an impromptu meeting of European leaders in Frankfurt yesterday failed to resolve differences ahead of a summit scheduled for this weekend. French Finance Minister Francois Baroin said Europe’s temporary bailout fund would be best enhanced with help from the European Central Bank, a position the ECB and Germany continue to oppose.
“Until the details of the financing are worked out there is still the scope for a disorderly Greek default, which could lead to a Lehman-panic moment,” said Tim Condon, Singapore-based head of Asian research at ING Groep NV. “Investors don’t want to be holding anything risky in that kind of an environment.”
The rupee declined 0.6 percent to 49.4250 per dollar as of 9:38 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 49.4850 earlier, the weakest level since Oct. 5. The Dollar Index, which tracks the greenback against six major trading partners, rose for the first time in three days.
Offshore forwards indicate the rupee will trade at 50.18 to the dollar in three months, compared with expectations for a rate of 49.85 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
Editors: Andrew Janes, James Regan
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
