Rupee Faces Longest Run Of Weekly Losses Since May Amid Outflows
India's rupee headed for a third weekly decline, the longest stretch of losses since May, amid signs demand for the nation's assets is waning.
Overseas funds are selling local stocks for a second straight week for the first time since February, while foreign holdings of rupee-denominated bonds are falling for a third week as investors turn cautious ahead of a potential U.S. interest-rate increase this year. The rupee fell with other emerging-market currencies on Friday, as better-than-expected U.S. data bolstered the dollar. Odds that the Federal Reserve will raise rates have jumped to 68 percent from 59 percent at the end of last month.
"Investors are getting nervous," said Bhupesh Bameta, Mumbai-based head of research for currencies and rates at Edelweiss Financial Services Ltd. "Rising expectations of higher U.S. rates are driving outflows and weighing on the rupee."
The rupee weakened 0.3 percent from Oct. 14, the most in five weeks, to 66.88 a dollar as of 11:28 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. It fell 0.1 percent on Friday and is down 1.1 percent this year. Bameta predicts the rupee to weaken to 68 against the greenback by the end of this year.
Foreign investors sold $21.2 million of Indian shares in the first three days of this week after withdrawing $340.7 million last week. Their holdings of local government and corporate notes have fallen by 1.9 billion rupees in four days through Thursday, after declining about 67 billion rupees ($1 billion) in the previous two weeks.
Sovereign bonds advanced on Friday after the central bank said late Thursday that it would buy up to 100 billion rupees of government debt through open-market operations on Oct. 25.
The yield on notes due September 2026 fell two basis points to 6.74 percent, prices from the Reserve Bank of India's trading system show. It is down one basis point for the week. India is due to sell 150 billion rupees of securities at an auction later on Friday.
© 2016 Bloomberg L.P
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