Mumbai: The rupee weakened on speculation overseas investors will increase sales of the nation’s stocks as company earnings decline amid slowing economic growth.
The currency headed for a second weekly loss after Reliance Industries Ltd, India’s biggest company by market value, said third-quarter profit fell 9.8%. Global funds sold more local shares than they bought on eight of the first 13 trading days of this month, data from the capital markets regulator show.
“Asian currencies including the rupee are set to decline against the dollar as investors remain risk-averse amid the deteriorating global economic situation,” said Thio Chin Loo, a senior currency strategist in Singapore at BNP Paribas SA.
The rupee fell 0.1% to 49.1575 per dollar at close in Mumbai, according to data compiled by Bloomberg. The currency will weaken to 50 in the coming weeks, Thio said.
The rupee has lost 0.8% this month, adding to the 19% slump last year, as global funds sold $728 million more Indian stocks than they bought. All of the 10 most active Asian currencies outside Japan fell against the dollar this month.
Offshore contracts indicate traders bet the rupee will trade at 49.38 to the dollar in a month, compared with expectations for 49.34 on Wednesday.
Implied volatility on one-month dollar-rupee options fell to 14.2% on Thursday, the lowest since September, Bloomberg data show. The measure of exchange-rate fluctuations touched 33% on 27 October, the highest in at least nine years. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices.
“The currency options market has been quiet of late, but I expect volatility to pick up in time,” BNP’s Thio said.
The rupee strengthened earlier as global stock advances tempered concern that investors will increase sales of emerging-market assets. It also rose on speculation some exporters are converting their overseas earnings after the local currency fell to a six-week low this week.
“The rupee rose in line with the gains in global stocks,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “In addition, exporters, who were major dollar sellers yesterday (Wednesday), are expected to continue selling.”
The S&P 500 Index added 4.4% on Wednesday. The benchmark Bombay Stock Exchange Sensex index advanced 0.4% on Thursday.