Rupee in worst streak since August

Mumbai: India’s rupee fell for a sixth day, the longest losing run since August, amid speculation the Federal Reserve will raise interest rates as early as next month, sparking concern investors will sell emerging-market assets.
Minutes of the April 26-27 Federal Open Market Committee meeting released on Wednesday in Washington showed most officials said at the gathering that a move in June would be warranted if economic data indicate stronger growth and inflation. That follows several speeches by regional Fed bank presidents warning investors not to dismiss a mid-year hike after the odds of such a move edged close to zero. Foreign holdings of rupee-denominated debt have fallen this week at the fastest pace since February.
“The FOMC minutes have prompted a selloff in the emerging-market space and that’s translated into a weaker rupee,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd. “The rupee is likely to retreat further on the back of dwindling flows and a stronger dollar.”
The Indian currency dropped 0.4 per cent to 67.2475 a dollar as of 11:23 a.m. in Mumbai, taking its decline since May 11 to 1 per cent, according to prices from local banks compiled by Bloomberg. It fell to 67.2575 earlier Thursday, the weakest level since March 16.
Lasrado expects the rupee to slide to as low 68.50 a dollar by the end of 2016. The currency’s recent losses have been fueled also by a May 13 report that showed Indian exports contracted 6.7 per cent in April from a year ago, a 17th month of declines. Foreign holdings of Indian government and corporate bonds fell by 35.5 billion rupees ($528 million) in the last three days, the most for such a period since February, National Securities Depository Ltd. data show.
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, climbed to a seven-week high. Odds for a June US rate hike have surged to 32 per cent from 4 per cent at the start of this week, Fed Funds futures show.
Sovereign bonds were steady, with the yield on notes due January 2026 at 7.48 per cent, according to prices from the central bank’s trading system. It has risen three basis points this week.