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: Rupee completed its worst week since February as a faltering global economic recovery and a widening budget deficit triggered a slide in local stocks. The rupee slumped 2.3% this week to 49.005 per dollar on Friday. The currency has dropped 2.2% this month making it Asia’s worst performer outside Japan.
The rupee fell to the lowest level since May 15 after Group of Eight leaders said the recovery from the deepest recession since World War II remains too fragile for any reversal of stimulus measures. China’s exports fell for an eighth month in June as overseas demand shrank. The rupee also fell on concern India’s widening budget deficit will erode investors’ confidence and prompt them to sell their holdings.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 9.5% this week, the most since the five-day period ended October 24.
Five-year bonds completed their first weekly decline in a month after the government raised its annual debt-sale target by 25 % to a record to bridge a budget deficit that’s set to reach a 16-year high. Yields on the 6.07% note due May 2014 climbed 20 basis points this week to 6.43% on Friday. The price dropped 0.83, or 83 paise per 100-rupee face amount, to 98.50. A basis point is 0.01 percentage point.
Yields on most-traded notes due 2014 added 19 basis points this week, the most since the five-day period ended June 12, on speculation some investors sold the securities to raise cash for purchases at a government debt auction today. India sold a total 150 billion rupees ($3.1 billion) of debt maturing in 2015, 2019, 2024 and 2034, according to the central bank. The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, decreased this week. The rate, a fixed payment made to receive floating rates, dropped to 6.10 percent from 6.18% at the end of last week. The spread between one-year and 10-year bond yields in India widened to a record 3.01 percentage points on July 8, according to data compiled by Bloomberg, indicating less demand for longer-term securities as the government increases sales.
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