By Anil Varma
Nov. 24 (Bloomberg) -- India's rupee declined on signs investors are taking money out of emerging markets as financial institutions worldwide face mounting credit-market losses.
The currency extended two weeks of losses after data from the nation's capital market regulator showed overseas investors extended record sales of local equities. Eight of the 10 most- active currencies in Asia outside Japan fell today as Asian stock indexes dropped on speculation demand for the region's assets and exports is falling amid a deepening global economic slump.
``The rupee will face some more uncertainty and volatility in the short term,'' said K.V. Mallik, treasurer at state-owned UCO Bank in Kolkata. ``Outflows from the equity market and import-related payments will keep some pressure on the rupee.''
The rupee weakened 0.1 percent to 50.095 a dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg. It touched an all-time low of 50.5925 in intraday trading on Nov. 20. The currency has lost 21.3 percent this year, the most since 1991.
Implied volatility on one-month dollar-rupee options rose today to 26 percent, near the highest this month, Bloomberg data show. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options.
The Bombay Stock Exchange's benchmark Sensitive Index lost 0.1 percent. The MSCI Asia-Pacific Index declined 0.6 percent.
Stock Sales
Investors based abroad pulled a record $4.27 billion out of India's equity and debt markets last month as the credit crisis escalated following the collapse of Lehman Brothers Holdings Inc. in September. They sold $13.4 billion of shares this year, data provided by the Securities and Exchange Board of India show.
The rupee's losses were curbed by speculation the central bank seeks to limit declines that may stoke inflation.
The Reserve Bank of India's foreign-exchange reserves have fallen by almost $65 billion from a record $316.2 billion reached in May, indicating it has been selling dollars. India's inflation eased to 8.9 percent, the slowest in five months, in the first week of this month, the government said Nov. 20. Currency losses increase the cost of imported goods.
Offshore forward contracts showed bets for how far the rupee will weaken in the next month were little changed. Non- deliverable contracts showed an implied rate of 50.95 rupees to the dollar, versus 51.05 on Nov. 21.
Forwards are agreements in which assets are bought and sold at current prices for future delivery. Indian rupee forwards traded overseas are non-deliverable, meaning they are settled in dollars rather than the local currency.
To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.
Last Updated: November 24, 2008 07:07 EST
