The rupee completed its biggest weekly decline in a month on concern faster inflation will erode returns from the nation?s assets and deter investors.
The currency fell to the lowest level in more than three months after a government report on April 18 showed the consumer-price index climbed 9.47% in March from a year earlier, after an 8.83% advance the previous month. The rupee also weakened on speculation local gold traders will boost dollar purchases to accelerate bullion imports and meet stronger demand for the metal before Akshaya Tritiya on April 24. ?There?s caution in the market because of the inflation concerns,? said Vikas Babu, a trader at state-run Andhra Bank in Mumbai. ?We are also seeing huge demand for dollars from importers, especially gold-related.?
The rupee declined 1.5% this week to 52.085 per dollar in Mumbai, the biggest drop since the five days ended March 23, according to data compiled by Bloomberg. The currency gained 0.1% on Friday after earlier touching 52.20, its weakest level since January 10.
The central bank may sell dollars to curb the rupee?s losses, according to Alpari Financial Services, as a weaker currency would add to import costs. Reserve Bank of India Governor Duvvuri Subbarao said this week policy makers are ?concerned? about inflation expectations.One-month implied volatility for the rupee, a measure of exchange-rate swings used to price options, was unchanged at 9.85%. The government yields rose for a third straight session on Friday, erasing the rally in debt prices seen after the central bank’s rate cut, on rising expectations that a new benchmark 10-year bond will be introduced. The yield on the benchmark 10-year bond settled up 13 basis points to 8.54%, well above the 8.45% levels it was fetching the day before the RBI’s easing move.