Mumbai: India's rupee fell to the lowest level in a week on speculation importers boosted purchases of the dollar to pay month-end bills. The Reserve Bank of India today said the government's economic policy overhaul may boost room to focus on spurring growth, while signaling the scope for monetary easing is limited by risks such as elevated inflation. The central bank will lower borrowing costs to 7.75 per cent from 8 per cent, according to 25 of 29 economists.
Three predict a reduction to 7.5 per cent and one sees no change. "We are seeing month-end demand for dollars, largely from oil companies," said Ravi Ranjit, chief manager at Federal Bank. "Any deviation from expectations at tomorrow's policy review would lead to a sharp move in the currency, and investors will also be focused on the tone of the statement."
The rupee declined 0.4 per cent to 53.9150 per dollar in Mumbai, according to data. It touched 53.9550 earlier, the weakest level since January 21. One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose 20 basis points, or 0.20 percentage point, to 10 per cent. Three-month onshore rupee forwards traded at 54.90 per dollar, compared to 54.68 on January 25, according to data. Offshore non-deliverable contracts were at 54.78 versus 54.59.