The Indian rupee posted its biggest decline in nearly four weeks after the Reserve Bank of India reported that the current-account deficit widened the most in a year.
The rupee fell 0.3 percent to 60.6850 per dollar at the close of trading in Mumbai, the biggest decline since Aug. 6. The currency’s one-month implied volatility, which measures the expected swings in the exchange rate used to set prices to options, plunged 0.05 percentage point, or five basis points, to 7.01 percent.
The current-account gap in the second quarter was $7.8 billion, an increase of $1.2 billion from the previous quarter. However, this is still smaller than the $21.8 billion deficit a year ago.
“The higher current-account deficit is causing some nervousness among importers and contributed to the rupee’s decline,” Ankur Jhaveri, a Mumbai-based co-head of currency and rates at Edelweiss Financial Services Ltd., told Bloomberg News. “The rupee is also following the weakness in Asian currencies on the back of a stronger dollar.”
The yield on the 8.4 percent government bonds that mature in July 2024 fell 0.03 percentage points or three basis points, to 8.52 percent, the biggest decline since Aug. 20.
Meanwhile, the Turkish lira declined after Deputy Prime Minister Ali Babacan announced that Turkey is facing its harshest drought in 14 year, boosting speculation the central bank will find it hard to control inflation.
The lira plunged 0.7 percent to trade at 2.1758 per dollar as of 5:14 pm Istanbul time, its biggest decline since Aug. 20. In an interview with NTV, Babacan said that drought is pushing up food prices, which have accelerated faster than general consumer prices.To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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