RTRS: Rupee Falls as Global Slump to Damp Demand for Stocks, Exports
India’s rupee weakened for a second day on concern a deepening global economic slump is reducing demand for the nation’s assets and exports.
Nine of the 10 most-active currencies in Asia outside Japan declined after stocks worldwide fell on skepticism President Barack Obama’s financial rescue plan to ease the global recession will work. India’s economy will expand at the slowest pace in six years, the government said this week. The local benchmark stock index slumped 1.4 percent and the MSCI Asia Pacific Index of shares slid for a third day.
“The rupee should remain under downward pressure because the stock-market outlook is still uncertain and exports are weakening,” said Mohan Shenoi, treasurer at Kotak Mahindra Bank Ltd. in Mumbai.
The rupee dropped 0.2 percent to 48.825 per dollar as of 10:09 a.m. in Mumbai, according to data compiled by Bloomberg. It fell as low as 48.89 earlier, the lowest in almost a week.
The currency may trade between 48.00 and 49.20 in the coming days, according to Shenoi. The median estimate of 25 strategists and economists surveyed by Bloomberg is for the rupee to weaken to 49.00 by the end of March.
The Standard & Poor’s 500 Index tumbled 4.9 percent yesterday, the most since Obama’s inauguration last month, after Treasury Secretary Timothy Geithner pledged financing of as much as $2 trillion, without providing details on how he will help banks cope with toxic assets.
Equity Sales
Sales of Indian equities by overseas funds have exceeded purchases by $1 billion this year on risk aversion, adding to a record $13.3 billion in net sales in 2008, according to data released by the Securities and Exchange Board of India.
Indian exports fell for a third straight month in December, the government said Feb. 2. The 12 percent decline in October was the first in seven years. Merchandise exports account for about 15 percent of the economy.
Offshore contracts indicate traders bet the rupee will trade at 48.97 to the dollar in a month, compared with expectations of 48.88 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
