Rupee slid the most in a week on speculation fund outflows from local stocks will accelerate as investors shun emerging-market assets amid concern the global economic recovery may stall.
The BSE?s Sensitive Index lost 2%, the biggest retreat since June 1, as the MSCI Asia-Pacific Index of regional shares dropped. Overseas investors sold $2 billion more Indian shares than they bought in May, the most since October 2008. The deficit on India?s current account may widen to $30 billion in 2010 from $25.6 billion last year, according to Kotak Mahindra Bank Ltd.
?Overseas investors are paring their holdings of our stocks due to global factors, and that is weakening sentiment toward the rupee,? said Sudarshan Bhatt, chief currency trader Corporation Bank. The rupee slid 0.5% to 47.09 per dollar. It has weakened 4.6% this quarter, Asia?s second-worst performance, after South Korea?s won.
India?s 10-year bonds rose for a second day on speculation Europe?s widening debt crisis will hamper a global recovery, delaying interest-rate increases in Asia?s third-largest economy.
Yields fell to their lowest in two weeks as the MSCI Asia-Pacific Index of regional shares slid after the US Labour Department unveiled a weaker-than-estimated jobs report. The Reserve Bank of India?s pace of increasing interest rates to contain inflation is appropriate? and has factored in risks to global economic growth, deputy governor Subir Gokarn said on Monday.