Rupee Has 11th Weekly Loss as Stocks Plunge, Growth Outlook Cut

By Anoop Agrawal and Anil Varma

Oct. 24 (Bloomberg) -- India's rupee dropped for an eleventh week, the longest losing streak since December 2005, as the nation's benchmark share index plunged the most in four years on signs global economies are headed for a recession.

The currency weakened past 50 per dollar for the first time earlier as the Reserve Bank of India cut the economic growth outlook for the year ending March 31 to as little as 7.5 percent from an earlier estimate of 8 percent. The central bank also left the benchmark interest rate unchanged, dashing investor expectations for a reduction to prevent an economic slump.

``Domestically, the exchange rate is not getting support from the interest-rate policy and a cut in borrowing costs would have further driven away rupee investors,'' said Vinod Kumar Khanna, general manager of treasury at state-owned Union Bank of India in Mumbai. ``With global equity markets under intense pressure, the rupee will weaken further.''

The rupee, which was made partly convertible in 1993, slid as much as 0.7 percent to 50.165 per dollar, an all-time low, before closing at 49.96 at 5 p.m. in Mumbai, according to data compiled by Bloomberg. It fell 2.2 percent this week. Nine of the 10 most-traded Asian currencies declined this week.

The currency has lost more than 21 percent versus the dollar this year and is the worst performer in Asia after South Korea's won. It is headed for its worst year since 1991, when the nation devalued it by an average 20 percent against four major currencies to help boost exports.

Risk of Flight

The central bank today left the repurchase rate at 8 percent, four days after slashing it by 1 percentage point.

``The recent slide in the rupee has stopped the central bank from further loosening monetary policy'' as it may ``increase the risk of capital flight,'' said Sherman Chan, an economist at Moody's Economy.com.

The rupee pared losses on speculation the central bank intervened to stem declines. The Reserve Bank doesn't comment on daily rupee movements, according to its Mumbai-based spokeswoman Alpana Killawala.

India's foreign-exchange reserves have dwindled by more than $42 billion to $273.9 billion as on Oct. 17, from a record $316.2 billion reached in May, central bank data show. The drop indicates policy makers sold dollars.

Overseas funds are shunning emerging-market assets as Pakistan, Hungary, Iceland, Ukraine and Belarus approached the International Monetary Fund for financial aid. Russia faces possible cuts to its sovereign debt rating and Argentina said this week that it will seize its nation's pension funds.

Shunning Assets

Sales of Indian shares by overseas investors this year exceeded purchases by a record $12.2 billion as the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, slid more than 55 percent. The gauge, headed for its first annual decline since 2001, fell 11 percent today, the most since May 2004.

The MSCI Asia Pacific Index of regional shares tumbled as much as 6.2 percent today, touching the lowest since 2004.

Asia's third-biggest economy faces a ``temporary slowdown'' in the year ending March 31, Prime Minister Manmohan Singh said on Oct. 20. Growth averaged almost 9 percent in the five years through March 31, the fastest for such a period since India gained independence from Great Britain in 1947.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net