The Indian rupee posted its first decline in four days on speculation the Federal Reserve will hike interest rates, weighing on inflows to emerging markets.
The currency plunged 0.1 percent to 60.6750 per dollar at the close of trading in Mumbai. The rupee’s one-month implied volatility, a measure of expected swings in the exchange rate used to set price to options, declined 0.06 percentage points or six basis points, to 7.12 percent.
“The rupee’s weakness is mainly because of the Fed minutes, which were a tad hawkish,” Anindya Banerjee, a Mumbai-based currency analyst at Kotak Securities Ltd., told Bloomberg News. “The more hawkish the Fed gets, the more uncomfortable speculators are.”
Minutes of Fed’s monetary authority meeting in July, which were released on Wednesday, revealed that some policy makers said that they may increase interest rates earlier than expected.
Malaysia’s ringgit also slid on speculation the Fed looks set to raise interest rates sooner than anticipated. The ringgit fell 0.1 percent to 3.1710 per dollar after earlier touching 3.1778, the lowest level since Aug. 15. The currency’s one-month implied volatility grew 0.27 percentage points or 27 basis points to 5.75 percent.
An inflation report released yesterday showed that consumer prices fell in July, extending its decline after it earlier rose to the highest level in three years, reducing the possibility of further interest rate hikes. Consumer prices grew 3.2 percent in the year through July, compared with 3.3 percent in June.
The yield on the 10-year government bonds jumped one basis point to 3.95 percent, after declining two basis points on Wednesday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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