BLBG:Rupee Sinks to Record Low on Greece Euro-Exit Risk: Mumbai Mover
India’s rupee fell to a record low as concern debt-stricken Greece will leave the euro bolstered demand for dollars and curbed appetite for emerging-market assets.
The currency reached its weakest level since December after Greek political leaders’ attempts to form a coalition following a May 6 election broke down yesterday. The Reserve Bank of India is closely observing the rupee’s movement and will do its best to curb volatility, central bank Deputy Governor H.R. Khan told reporters in Pokhara in Nepal today. Separately, Deputy Governor K.C. Chakrabarty said in Mumbai that the monetary authority will not intervene to protect any rupee level.
“Market pressures are pushing the rupee lower, considering the global risk-averse environment we have now,” said Ravi Ranjit, chief manager at Federal Bank Ltd. (FB) in Mumbai. “The Reserve Bank of India seems to be intervening and I think we will see regulatory measures to support the rupee.”
The rupee declined 0.9 percent to 54.2887 per dollar as of 12:04 p.m. in Mumbai, according to data compiled by Bloomberg. It touched all-time low of 54.32 and is down 6.2 percent this quarter, Asia’s worst performance.
The rupee’s one-month implied volatility, a measure of exchange-rate swings used to price options, rose 100 basis points, or 1 percentage point, to this year’s high of 13 percent.
‘Weak’ Fundamentals
The currency briefly pared losses today after Bloomberg UTV reported, citing sources it didn’t identify, that the central bank may sell dollars directly to oil companies, through so- called special market operations.
India’s “weak” economic fundamentals are pressuring the currency more than global factors, according to ING Vysa Bank Ltd. The trade deficit swelled to a record $184.9 billion in the year ended March 31 and industrial output shrank 3.5 percent in March from a year earlier, government figures showed this month. Standard & Poor’s cut the outlook on the nation’s BBB- sovereign debt rating to negative on April 25.
“What needs to be done is to restore investor confidence that has completely eroded over the past few months,” said Upasna Bhardwaj, Mumbai-based economist at ING Vysya. “We require sound fundamentals to attract capital inflows that are needed to fund the current-account shortfall.”
Six-month onshore currency forwards were trading at 55.89 a dollar, compared with 55.46 yesterday, and offshore non- deliverable contracts were at 56.16 from 55.58. 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: Sandy Hendry at shendry@bloomberg.net
