...while rupee loses steam

mumbai — The rupee weakened past 68 per dollar for the first time since June as rising possibility of a US interest-rate increase triggered outflows from Indian assets.

The currency dropped 0.5 per cent to 68.1350 a dollar in Mumbai, declining for the fifth time in six days, prices from local banks compiled by Bloomberg show. It fell to as low as 68.19 during the day and ended the week with a 1.3 per cent loss, the biggest since January. State-run banks sold dollars, probably on behalf of the Reserve Bank of India, two Mumbaibased traders said, asking not to be named.

Federal Reserve Chair Janet Yellen’s remarks on Thursday cemented expectations for policy tightening at the Federal Open Market Committee’s meeting in Washington December 13-14. Odds that the Fed will tighten policy have risen to 96 per cent from 68 per cent at the start of this month. A gauge of the rupee’s one-month implied volatility, used to price options, climbed 38 basis points in a second weekly jump.

“Rising odds of a rate increase in the US have caused the dollar index to surge,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank. “The central bank is in the market and investors will see how they move.”

Foreign holdings of local bonds fell for a fourth straight day on Thursday, taking outflows in the period to almost ₹122 billion ($1.8 billion). Overseas investors have sold a net $1.3 billion of Indian shares so far this month.

Sovereign bonds fell on Friday, snapping a three-day rally. The yield on the benchmark note due September 2026 rose one basis point to 6.43 per cent, according to prices from the RBI’s trading system. Its close on Thursday was the lowest for a benchmark 10year security since May 2009. The yield plunged 29 basis points this week.