India's Rupee Falls to Two-Year Low as Risk Aversion May Rise

By Anil Varma

Sept. 15 (Bloomberg) -- India's rupee slumped to a two-year low on concern investors will dump riskier assets, including emerging-market securities, after Lehman Brothers Holdings Inc. said it will file for bankruptcy.

The Indian currency declined for a fifth day on concern liquidation of the 158-year U.S. securities firm will deepen a financial crisis that threatens to drag the global economy into a recession. The rupee fell as local traders sold the currency, taking a cue from its decline in the overseas non-deliverable forward market, said Paresh Nayar, head of currency and debt trading at Development Credit Bank Ltd. in Mumbai.

``Concerns about a pullout of investors from emerging- markets is driving rupee sales,'' Nayar said. ``Also, the NDF market is influencing the rupee's trend.''

The rupee fell 0.4 percent to 45.9325 per dollar as of 10:06 a.m. in Mumbai, adding to last week's 2.3 percent loss, according to data compiled by Bloomberg. It earlier touched 45.995, the lowest since September 2006.

Lehman, once the fourth-largest U.S. investment bank, said it intends to file for bankruptcy after Barclays Plc and Bank of America Corp. abandoned talks to buy the crippled firm. Bank of America, the largest U.S. consumer bank, said today it has agreed to buy Merrill Lynch & Co. in an all-stock deal that values the world's biggest brokerage firm at about $50 billion.

Indian stocks fell. The Bombay Stock Exchange's Sensitive Index, or Sensex, declined as much as 5.2 percent. The MSCI Asia Pacific excluding Japan Index lost 1.5 percent. Markets in China, Hong Kong, Japan and South Korea are closed today for holidays.

To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.