India’s rupee headed for its biggest weekly decline since mid-August on speculation demand for the nation’s assets is waning amid prospects the Federal Reserve will raise U.S. interest rates next month.
A gauge of dollar strength climbed 0.8 percent this week as Fed Chair Janet Yellen said a December rate rise would be a “live possibility” if U.S. economic data continue to point to expansion and firmer prices. Foreign holdings of rupee-denominated debt have fallen 13.5 billion rupees ($205 million) since Oct. 30, the most since the week ended Sept. 11, data from the National Securities Depository Ltd. show. Stocks have seen an outflow of $47.8 million.
“While the rupee remains one of our favorite Asian currencies in terms of its outperformance relative to other currencies, we still see some downward pressure on it against the dollar,” said Mitul Kotecha, head of foreign-exchange and rates strategy for Asia at Barclays Plc in Singapore. “We look for some depreciation into year-end,” he said, without providing a forecast.
The rupee retreated 0.8 percent this week to 65.8025 a dollar as of 11:23 a.m. in Mumbai, prices from local banks compiled by Bloomberg show. That’s the steepest drop since the five days ended Aug. 21. The currency declined 0.1 percent on Friday and fell to as low as 65.8250, the weakest since Sept. 30.
Indian sovereign bonds were on course for a fourth straight weekly loss. The 10-year yield climbed four basis points to 7.68 percent, set for its highest close since Sept. 28, according to prices from the central bank’s trading system. It was steady on Friday.