India’s rupee fell to the lowest level in more than three weeks after central bank Governor Duvvuri Subbarao said the nation’s current-account deficit is set to widen from a record. Bonds declined.
The shortfall in the fiscal year through March is expected to be significantly higher than the previous period’s 4.2 percent of gross domestic product, Subbarao said in Mumbai. The rupee may become more vulnerable to the deficit should fund inflows into Indian stocks slow, according to IDBI Federal Life Insurance Co. Foreigners bought a net $3.3 billion of local stocks this month through Feb. 8, exchange data show.
Currently, the rupee is only supported by inflows, said Aneesh Srivastava, chief investment officer in Mumbai at IDBI Federal. Any sort of risk aversion will cause outflows and hit the currency hard.
The rupee declined 0.1 percent to 53.9250 per dollar as of 9:35 a.m. in Mumbai, according to data compiled by Bloomberg. It touched 54.0125 earlier, the lowest level since Jan. 18. One- month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose one basis point, or 0.01 percentage point, to 9.23 percent. Markets in China, Hong Kong, Taiwan, Singapore and Malaysia are closed for the Lunar New Year holiday.
Group-of-Seven nations are considering releasing a statement on exchange rates this week to calm concern that the world is on the brink of a currency war, three officials from the countries said. The international finance group is looking to release it before the G-20 meeting in Moscow.