The Indian rupee plunged to its lowest level in one week over speculation that potential decline in agricultural output and surging crude oil prices may trigger inflation.
The rupee declined 0.2 percent to trade at 60.23 per dollar by 12:56 p.m. in Mumbai. The currency earlier touched 60.39, its lowest level since June 18.
Brent crude prices touched the strongest level in nine months over fears that the ongoing Iraqi violence may negatively affect supplies. India relies on crude imports to meet 80 percent of its domestic demand. The weather department also warned on Tuesday that the monsoon would be 38 percent lower than the 50-year mean rainfall this month. The monsoon contributes 70 percent of the country’s yearly rainfall.
“Looking outside the window, I see no sign of rain,” Mahendra Jajoo, a Mumbai-based chief investment officer for fixed income at Pramerica Asset Managers, told Bloomberg. “Oil is a concern, but the monsoon is key for India’s prospects and the situation there is looking very bad.”
The rupee has slid 1.9 percent this month after oil prices rose 4.5 percent. The currency’s one-month implied volatility, which tracks the expected shifts in the foreign exchange rate used to assign value to options, surged 10 basis points, to 7.71 percent.
The yield on 8.83 percent notes that mature on November 2023 fell 0.02 percentage point, or two basis points, to 8.69 percent. The yield had earlier surged to 8.75 percent, close to a high of 8.78 percent touched on Monday, the most since May 21. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com