India's rupee declines to two-year low as export slump deepens
India's rupee fell to its weakest level in two years as a slump in exports drove the nation's trade deficit to an eight-month high. The shortfall reached $12.8 billion in July as overseas shipments dropped 10.3 percent from a year earlier, official figures showed after the close of trading on Friday. Exports slipped for an eighth month, the longest run of declines since 2009. China's surprise yuan devaluation last week reignited concern of a regional currency war as Vietnam widened the dong's trading band.
The rupee weakened 0.5 percent to 65.3125 a dollar at close in Mumbai on Monday, according to prices from local banks compiled by Bloomberg. The currency slid to 65.3750 in intraday trading, its lowest level since September 2013. Sovereign bonds were steady on Monday while the benchmark S&P BSE Sensex index of shares lost 0.7 percent.
"The wider trade deficit is a matter of concern," said Naveen Raghuvanshi, a Mumbai-based currency trader at DCB Bank Ltd. "Broad gains in the dollar and losses in local equities are also weighing on the rupee." The Bloomberg Dollar Spot Index advanced for a third day. A report on U.S. manufacturing Monday may offer clues on the timing of the Federal Reserve's first interest-rate increase since 2006. Weak exports continue to offset relief from a lower commodity imports bill for India, DBS Bank Ltd. economists, including Singapore-based Radhika Rao, wrote in a report.