The Indian rupee declined by the steepest margin in over two weeks as oil importers rushed to buy dollars to pay for shipments.
The rupee fell 0.2 percent to trade at 59.87 per dollar at 9:50 a.m. local time, the weakest performance since June 18. The currency has also depreciated over fears that the inadequate monsoon rains will affect farm output and hence weigh on economic recovery in Asia’s third biggest economy.
The monsoon, which contributes at least 70 percent on India’s rainfall, has averaged 43 percent weaker than 50-year average since the beginning of June, data from the weather department showed.
“It seems that there is dollar demand from oil companies and that is pressurizing the rupee,” Naveen Raghuvanshi, a currency trader at DCB Bank Ltd in Mumbai spoke to Bloomberg. “A bad monsoon could also be a concern. The rupee is expected to trade in a narrow range from 59.75 to 59.95 ahead of the budget.”
The new government, led by Prime Minister Narendra Modi, is expected to announce its first budgetary estimates on Thursday this week. The government has unveiled a host of measures aimed at spurring economic recovery, such as removing fuel subsidies and increasing railway passenger and freight charges.
The rupee’s 1-month implied volatility, which measures the expected swings in the exchange rate used to assign price to options, dropped 0.11 percentage point, or 11 basis points, to 7.13 percent.
The 3-month rupee forwards in the onshore market plunged 0.2 percent to trade at 61.15 per dollar while the offshore non-deliverable forwards surged 0.2 percent to 60.62. 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 email@example.com