The Indian rupee dropped for the third week as the market bet importers will rush to buy dollars to pay their month-end dues.
Foreign investors offloaded a net of $162 million of Indian bonds and stocks between Monday and Wednesday last week, according to exchange data. However, brokerage firm Mecklai & Mecklai Ltd said that the Indian currency’s losses will be narrow owing to increased optimism fuelled by the country’s expanding foreign reserve stockpile, which increased $2.8 billion in a week by April 11 to $309 billion, the highest since 2011 when it hit $321 billion.
“The rupee is under pressure as oil and defense importers will demand the greenback to pay month-end bills,” Amogh Moghe, a currency trader at Mecklai & Mecklai in Mumbai, told Bloomberg. “Rising reserves will cap big losses in the currency.”
The rupee fell 0.1 percent since April 17 to 60.36 a dollar in late morning Mumbai trading. Data wasn’t available on April 18 as local markets were closed for public holiday. The rupee has declined 0.7 percent over the past three weeks. Moghe expects the currency to hover at around 60.25 and 60.40 on Monday.
The rupee’s one-month implied volatility, which measures the expected fluctuations in the exchange rate used to assign prices to options, advanced 0.02 percentage point, or two basis points, to 12.16 percent.
The country’s foreign exchange reserves are expected to rise to an all-time high of $329 billion in March 2015, Indranil Sen Gupta, an economist with the Bank of America Merrill Lynch in Mumbai, told Bloomberg last week. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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