Indian one-thousand rupee banknote (Photographer: Dhiraj Singh/Bloomberg)

Rupee Caps Longest Run of Weekly Losses Since May Amid Outflows

(Bloomberg) -- India’s rupee completed a third weekly decline, the longest stretch of losses since May, amid signs demand for the nation’s assets is waning.

Overseas funds have sold local shares this month for the first time since February, while foreign holdings of rupee-denominated bonds have fallen for a third week as investors turn cautious ahead of a potential U.S. interest-rate increase this year. The rupee fell with other emerging-market currencies on Friday, as better-than-expected U.S. data bolstered the dollar. Odds that the Federal Reserve will raise rates have jumped to 68 percent from 59 percent at the end of last month.

“Investors are getting nervous,” said Bhupesh Bameta, Mumbai-based head of research for currencies and rates at Edelweiss Financial Services Ltd. “Rising expectations of higher U.S. rates are driving outflows and weighing on the rupee.”

The rupee weakened 0.3 percent from Oct. 14, the most in five weeks, to 66.89 a dollar at the close in Mumbai, according to prices from local banks compiled by Bloomberg. It fell 0.1 percent on Friday and is down 1.1 percent this year. Bameta predicts the rupee to weaken to 68 against the greenback by the end of this year.

Rupee Caps Longest Run of Weekly Losses Since May Amid Outflows

Foreign investors have sold $56.4 million of Indian shares this month. Their holdings of local government and corporate notes fell by 1.9 billion rupees in four days through Thursday, taking this month’s decline to almost 67 billion rupees ($1 billion).

Sovereign bonds dropped this week, with the yield on notes due September 2026 rising one basis point to 6.76 percent, prices from the Reserve Bank of India’s trading system show. It was steady on Friday. The central bank plans to buy up to 100 billion rupees of government debt through open-market operations on Oct. 25, it said late Thursday.