Indian Rupee Drops a Third Week

Saturday, June 20, 2009

India’s rupee fell a third week, its longest losing streak since March, as funds sold emerging-market assets on concern the global economic slump isn’t over yet.

The currency reached a two-month low as overseas investors sold more Indian shares than they bought this week after the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, snapped a 14-week winning streak. The rupee also fell on speculation refiners increased dollar purchases, betting crude oil prices will climb from near an almost eight-month high.

“The near-term outlook is a bit bearish for the rupee because of global fundamental factors,” said Ritwij Mahanta, a trader at IndusInd Bank Ltd. in Mumbai. “The oil price movement has pushed up dollar demand and weakened the rupee.”

The rupee fell 1 percent this week to 48.0825 a dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It may decline to 48.35 next week, Mahanta said.

Funds based abroad have sold a net $348 million in the four days to June 17, according to the Securities & Exchange Board of India, reducing this month’s purchases to $945 million. The currency has rallied 5.5 percent this quarter.

The currency gained 0.3 percent today on speculation exporters took advantage of the rupee’s drop to convert overseas earnings.

“Exporters seized this opportunity and reduced part of their dollar holdings seizing negative impact on the rupee,” said Puneet Sharma, chief currency trader at state-owned Allahabad Bank in Mumbai. “The drop in the rupee seems temporary.”

Offshore contracts indicate traders bet the rupee will trade at 48.25 per dollar in a month, compared with expectations for a rate of 47.81 a week ago. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars.

(Bloomberg)