India’s rupee weakened after U.S. manufacturing data boosted speculation the Federal Reserve will pare stimulus as early as this month, a policy that’s driven inflows to emerging-market assets.
The U.S. Institute for Supply Management’s factory index climbed in November to the highest level in more than two years, beating economists’ estimates, a report showed yesterday. The rupee may also come under pressure as the Reserve Bank of India stopped direct supplies of dollars to oil importers.
“The timing and the extent of the Fed’s taper of quantitative easing is likely to remain a key determinant of the currency market dynamics for emerging markets as a whole,” analysts at Kotak Mahindra Bank Ltd., including Indranil Pan in Mumbai, wrote in a research report today. “For India, this will also be overlaid with domestic issues.”
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