The Indian rupee extended its decline for the third straight day, its longest depreciation in six weeks, following remarks by Federal Reserve Chair Janet Yellen that U.S. interest rates may be increased sooner than expected.
The rupee declined 0.1 percent to trade at 60.1925 at 9:45 a.m. local time, bringing its overall weekly decline to 0.4 percent. The rupee’s one-month implied volatility, which measures the expected moves in the exchange rate used to assign value to options, advanced 0.05 percentage point or five basis points, to 6.85 percent.
“The rupee weakened primarily on the back of Yellen’s comments on interest rates,” Anindya Banerjee, a Mumbai-based currency analyst at Kotak Securities Ltd told Bloomberg. “Investors fear that emerging markets including India could see outflows if the Fed raises rates.”
Yellen testified before the Congress, saying that the key interest rate will be increased when the slack in the labor market is fully utilized. The three-month offshore non-deliverable forwards plunged 0.2 percent to steady at 60.98 per dollar.
In the meanwhile, the Malaysia’s ringgit fell to the lowest level in two weeks on Yellen’s comments. The ringgit retreated 0.2 percent to trade at 3.1873 per dollar in Malaysia. It had earlier touched 3.2015, its weakest level since July 3. The ringgit’s one-month implied volatility remained slightly unchanged at 5.19 percent.
Malaysian inflation hovered close to the lowest level in five months in June. Local consumer prices accelerate 3.3 percent from a year ago, compared to 3.2 percent in May. The yield on the government 4.181 percent sovereign bonds that mature on July 2024 declined 0.02 percentage point or two basis points to 3.96 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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