Indian rupee weakens

by Bloomberg News
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Mumbai:  India's rupee fell to the lowest level in more than three weeks after official data showed factory output unexpectedly contracted in December.

The rupee was little changed from Monday at 53.8525 per dollar in Mumbai, according to data. It touched 54.1075 earlier, the lowest level since January 18. One- month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 13 basis points, or 0.13 percentage point, to 9.35 per cent. Markets in China, Hong Kong, Taiwan, Singapore and Malaysia are closed today for the Lunar New Year holiday.

Industrial production fell 0.6 per cent from a year earlier, after a revised 0.8 per cent drop in November, a government report showed yesterday. A survey predicted a gain of 1 per cent. Foreigners bought a net $3.3 billion of Indian stocks this month through February 8, exchange data show. The rupee pared losses after the Group-of-Seven nations released a statement in London, pledging to avoid devaluing their exchange rates in the pursuit of stronger economic growth and easing concerns of a currency war.

"Currently, the rupee is only supported by inflows," said Aneesh Srivastava, chief investment officer in Mumbai at IDBI Federal Life Insurance. "Any sort of risk aversion will cause outflows and hit the currency hard."

The currency was also weakened as Reserve Bank of India governor Duvvuri Subbarao on Monday said the nation's current- account deficit in the fiscal year through March is expected to be 'significantly higher'.


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