Rupee fell the most in a month on concern investors will cut holdings of emerging-market assets after the latest reports on US consumer confidence and inflation signaled the global economic recovery is faltering.
The currency weakened for a second day after a loss of 1% in the MSCI Asia Pacific excluding Japan Index of regional shares. A gauge of consumer sentiment slumped to an 11- month low and consumer prices held at a 44-year low in the world?s largest economy, separate reports from the US showed on July 16. The rupee also declined on speculation local importers will buy dollars to settle month-end bills.
?Concern still lingers about the sustainability of global economic growth and that?s fueling some risk aversion among investors,? said Sanjay Arya, treasurer at Bank of Maharashtra. ?A pick-up in dollar demand from importers before the end of the month also may put pressure on the rupee.?
The rupee retreated 0.7%, the most since June 22, to 47.1175 per dollar. It touched 47.1325 earlier, the weakest level since July 7. The currency may trade between 46.75 and 47.35 in the coming days, Arya predicted.
However, benchmark bonds gained, snapping a four-day decline, on optimism monsoon rains forecast by the weather office will boost agricultural production and slow food inflation.
The yield on the nation?s 10-year bonds fell from the highest level in a week after the Indian Meteorological Department said over the weekend rainfall may increase in the country?s eastern, central and southern parts this month. India?s wholesale price inflation in June approached a 19-month high touched in April. A fall in food prices will help the government reduce borrowing, said Krishnamurthy Harihar, a treasurer at FirstRand.
The yield on the 7.80% note due in May 2020 fell two basis points, or 0.02 percentage point, to 7.62%. The price rose 0.11, or 11 paise per Rs 100 face amount, to Rs 101.20.