Rupee Falls on Fears that Inflows May Decline, Thai Baht Rallies

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Rupee Falls on Fears that Inflows May Decline, Thai Baht RalliesIndia’s rupee posted its biggest loss in three weeks as traders expressed concern that inflows to emerging economies may slow down after the Federal Reserve reduced its monthly bond purchases by another $10 billion to $25 billion this week. This sets it on the path to conclude the program this October.

The rupee plunged 0.3 percent to trade at 60.2350 per dollar at 10:24 a.m. local time, its steepest decline since July 10. The currency has lost 0.1 percent of its value in July.

“The markets are a little jittery on concerns inflows will get impacted as the Fed’s bond purchases end later this year,” Anindya Banerjee, a Mumbai-based currency analyst at Kotak Securities Ltd, told Bloomberg News. “The rupee’s weakness is mainly driven by U.S. economic data last night and the Fed’s decision to further cut bond purchases.”

The India’s currency also fell on speculation the importers bought dollars to meet their month-end obligations. The rupee’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign price to options, increased 0.51 percentage point or 51 basis points, to 5.87 percent.

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Meanwhile, the Thailand baht appreciated as global funds bought more of local assets on confidence that the junta will turn around the ailing economy. The military government, which came into power via a coup on May 22, approved a massive infrastructure spending program on Monday that paves way for the construction of new national highways, railways and commuter transit network in Bangkok.

The baht rose 1 percent this month to trade at 32.128 per dollar at 4:30 p.m. in Bangkok, compared with a 1.2 percent gain in June. The currency rallied to 31.74, its highest level in eight months on July 23. Foreign funds have purchased a net $5.05 billion of Malaysian debt in July as of Wednesday, the most since February 2012. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com