The rupee fell to a five-month low on speculation that international investors would increase sales of local assets on signs the region’s economies are weakening.
Morgan Stanley cut its growth forecast for India to 7.2 per cent for the year ending March from 7.7 per cent earlier, citing a less favorable global environment, according to a research note released on Thursday. Japan’s exports fell faster in July and Malaysia’s economy expanded the least since 2009 last quarter, separate reports showed this week. India’s Sensitive Index of local shares lost 2.2 per cent, as exchange data showed foreigners cut holdings by $1.3 billion this month.
“The economic climate has caused concerns about inflows into India,” said Sudarshan Bhatt, chief currency trader in Mumbai at state-owned Corporation Bank. “The drop in the stock market is affecting the rupee.” The rupee declined 0.7 per cent to 45.7475 per dollar at the close in Mumbai, according to data compiled by Bloomberg. That is the biggest drop since February 24. It fell to 45.75 earlier, the weakest level since March 17.
Offshore forwards indicate the rupee would trade at 46.09 to the dollar in three months, compared with expectations for a rate of 45.82 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
Bonds recover
Government securities recovered on fresh buying by banks and companies.
The 7.80 per cent government security maturing in 2021 rose to Rs 97.00 from Rs 96.57, while its yield declined to 8.26 per cent from 8.32 per cent yesterday. The 8.08 per cent government security maturing in 2022 also shot up to Rs 97.8750 from Rs 97.54, while its yield dropped to 8.38 per cent from 8.43 per cent previously.
The 8.13 per cent government security maturing in 2022 also firmed up to Rs 98.26 from the last close of Rs 97.90, while its yield slipped to 8.37 per cent from 8.42 per cent. The 7.83 per cent government security maturing in 2018, the 7.59 per cent government security maturing in 2016 and the 8.30 per cent government security maturing in 2040 also ended higher at Rs 97.76, Rs 97.40 and Rs 97.05, respectively.
The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 50,110 crore from 27 bids at the four-day repo auction at a fixed rate of eight cent.
Call rate edges up
The call rate edged up on the overnight call money market on Thursday on stray demand from borrowing banks, ahead of long weekend holidays. The overnight call money rate settled slightly better at 8.05 per cent, from 8.00 per cent yesterday.
