Mumbai: The rupee dropped the most in two weeks on speculation an easing recession in the US will prompt the Federal Reserve, or Fed, to raise interest rates later this year, boosting the appeal of the dollar.
All of the 10 most active currencies in Asia outside Japan fell against the greenback as a gauge that tracks its strength extended the biggest advance in almost five months.
Futures traders raised bets for a Fed rate increase in September after the labour department reported the fewest job losses in eight months in May.
The rupee also fell as India’s benchmark share index fell the most in six weeks, tracking losses in the region.
The rupee’s decline on Monday reflects the dollar’s rally overseas on signs US economic conditions are improving, said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. Most Asian currencies are weak, tracking the weakness in stocks.
The rupee dropped 0.9% to 47.56 per dollar in Mumbai, according to data compiled by Bloomberg. That trimmed its gain this quarter to 6.4%, still the third best performance among the Asian currencies.
Offshore contracts indicate traders predict the rupee will trade at 47.71 to the dollar in a month, compared with expectations for a rate of 47.20 on 5 June.
Forwards are agreements in which assets are bought and sold at current prices for future delivery.
Non-deliverable contracts are settled in dollars rather than the local currency.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the British pound, the Canadian dollar, the Swiss franc and Sweden’s krona, climbed 0.6%, extending the 1.7% advance on 5 June, which was the biggest since 20 January.
The US labour department said on 5 June payrolls fell by 345,000 in May, compared with an average estimate for a decrease of 520,000 jobs in a Bloomberg survey of economists.
The Bank for International Settlements said in its quarterly report on Monday that the worst of the global recession may be over as governments and central banks have been successful in restoring investor confidence.
Futures traders increased bets to 28% that the Fed will increase the funds target rate to 0.5% in late September, from 15% odds a week ago, according to Bloomberg data.
The Bombay Stock Exchange’s Sensex lost 2.9%, the most since 28 April.
The MSCI Asia Pacific Index fell 1%. Funds based abroad bought Indian shares worth $63 million a day more than they sold last week, compared with a net $268 million in the five days through 29 May, according to the Securities and Exchange Board of India.