By Anil Varma
Jan. 6 (Bloomberg) -- India’s rupee weakened for the first time in four days on speculation importers bought dollars after the local currency reached a one-week high yesterday.
Indian banks and companies may step up purchases of the U.S. currency, said Vikas Babu, a trader at state-owned Andhra Bank in Mumbai. The rupee also fell on concern the economic and monetary stimulus unveiled by India isn’t enough to reverse the slowdown in Asia’s third-largest economy.
“Bids are coming in for the dollar as it is stronger against several currencies,” Babu said. “There’s also a sentiment that the stimulus package isn’t quite sufficient to fix the economic downturn.”
The rupee weakened 0.3 percent to 48.730 per dollar as of 10:48 a.m. in Mumbai, according to data compiled by Bloomberg. The currency’s 19 percent loss last year was the biggest since 1991 and the second-worst performance in Asia.
India’s import costs rose an average 34.4 percent last year as its currency declined, compared with 24.5 percent in 2007, government data show.
The Indian central bank cut its benchmark overnight lending rate, or repurchase rate, on Jan. 2 to 5.5 percent from 6.5 percent. It also lowered the reverse-repurchase rate, or the rate at which money is drained from the banking system, by a percentage point to 4 percent. Both the rates are now at the lowest levels since they were introduced in 2000.
The government raised the overseas investment limit in local corporate bonds to $15 billion from $6 billion and lifted restrictions on overseas borrowings and recapitalization of state-run banks. The economy may expand as little as 7 percent in the year ending March 31, the slowest pace since 2003, according to a government estimate on Dec. 23.
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
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