INR Drops to Month Low After USD Surge

India’s rupee fell the most in more than a month and government bonds declined on speculation an improving U.S. economy will prompt the Federal Reserve to bring forward its timetable for increasing interest rates.

A gauge of the greenback that tracks its performance against a basket of ten global currencies touched a 14-month high today before U.S. data forecast to show jobless claims decreased and retail sales improved. Fed Chair Janet Yellen told central bankers in Jackson Hole, Wyoming, last month that policy makers may raise rates sooner than investors anticipate amid labor-market gains. An increase will reduce the attractiveness of higher-yielding emerging-market assets.

The rupee dropped 0.5 percent to 60.6050 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. That’s the biggest loss since Aug. 6. The yield on the 8.4 percent sovereign notes due July 2024 rose two basis points, or 0.02 percentage point, to 8.52 percent, according to the central bank’s trading system.

“We are seeing a spill-over effect of the dollar’s strength globally,” said Anindya Banerjee, a currency analyst at Kotak Securities Ltd. in Mumbai. “That said, we expect the rupee to find support from foreign inflows into Indian assets, which should continue as other central banks around the world offer monetary stimulus.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza