The India’s rupee declined by the biggest margin in six months after the buoyant U.S. economy pushed the dollar up while Argentina’s debt default weighed on demand for emerging market assets.
The rupee fell 1 percent to trade at 61.1850 at the close of trading in Mumbai. This was the biggest decline since January 4. The currency touched a low of 61.1900 today, its weakest level since April 23, before closing 1.8 percent lower this week.
“The rupee is tracking the global markets meltdown post the downgrade of Argentina and that is stoking concern there may be outflows,” Ankur Jhaveri, a Mumbai-based co-head of currency and rates at Edelweiss Financial Services Ltd, told Bloomberg. “When there is uncertainty, that creates nervousness among importers and they are rushing to book hedges for the near term.”
The India’s currency one-month implied volatility, which measures the expected swings in the exchange rate used to assign price to options, rose 1.01 percentage point, or 101 basis points on Friday to 7.27 percent, bringing its cumulative gain this week to 166 basis points.
The US dollar rose after data this week indicated that the US economy grew 4 percent in the second quarter, up from a decline of 2.1 percent in the January-March quarter.
Meanwhile, the Malaysia’s ringgit plunged by the steepest margin in a week since December also on speculation that the Federal Reserve may increase interest rates due to the strong US economic data, dampening demand for assets from emerging economies.
The ringgit tumbled 0.5 percent to trade at 3.2120 per dollar in Malaysia, in an intraday session that saw it touch 3.2140, its weakest level since June 27. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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