India’s rupee touched a one-week low on speculation importers are buying dollars before European leaders gather to work out a plan aimed at preventing their debt crisis from spreading.
The BSE India Sensitive Index (SENSEX) of shares fell after Reserve Bank of India Deputy Governor Subir Gokarn indicated yesterday the monetary authority will refrain from cutting the amount lenders need to set aside as reserves. Imports rose 21.7 percent in October from a year earlier, compared with 17.2 percent the previous month, official data show.
The rupee declined 0.1 percent to 51.76 per dollar in Mumbai, according to data compiled by Bloomberg. It touched 51.9100 earlier, the weakest level since Nov. 30.
“If a deal is not reached in Europe this week, there would be a major sell-off across markets, and so importers are cautiously buying dollars today,” said Vikas Babu, a Mumbai- based currency trader at state-owned Andhra Bank. “There is also the concern that capital inflows might slow.”
The European Central Bank may delve deeper into its toolbox to stimulate bank lending and fight off a recession at a meeting in Frankfurt today. Europe’s leaders will convene in Brussels for talks to frame the fifth “comprehensive” solution in 19 months to a debt crisis that’s left Germany and France facing the threat of losing their AAA ratings from Standard & Poor’s.
Three-month offshore rupee forwards traded at 52.83 to the dollar, compared with 52.57 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
Source : bloomberg.com