India’s Rupee Declines on Dollar Demand by Importers, Brazil Real Also Falls

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India’s Rupee Declines on Dollar Demand by Importers, Brazil Real Also FallsThe Indian rupee plunged for the second straight day as importers rushed to buy the U.S. dollar to pay their bills.

The rupee declined 0.1 percent to close at 60.1350 in Mumbai after earlier declining 0.3 percent. The currency’s 1-month implied volatility, which measures the expected shifts in the exchange rate used to value options, plunged 28 basis points to 6.80 percent.

“The rupee fell as there was dollar demand from companies including oil importers,” Sajal Gupta, a currency analyst at brokerage Edelweiss Financial Services Ltd in Mumbai told Bloomberg. “The rupee partly recovered the day’s losses as there were some inflows as stocks revived.”

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Data released on Monday indicated that inflation is declining in Asia’s third-biggest economy, creating more room for the central bank to reduce interest rates and attract foreign investment into Indian stocks. Consumer prices rose 7.3 percent in June from a year ago, the smallest advance in more than two years, while wholesale prices grew by the weakest rate in four months.

In a separate report, the Brazilian real fell on bets that Federal Reserve Chair Janet Yellen will phase out the monthly bond purchases in her speech before the congress on Tuesday. The real fell 0.1 percent to trade at 2.2149 per dollar as of 10:25 a.m. local time.

Swap rates rose 0.02 percentage point, or two basis points, to 11.42 percent on contract that matures in January 2017. The minutes of the Federal Reserve’s meeting in June showed that the bank will end its bond buying program in October should the economy recovery strengthen as projected.  To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com