Rupee completes third weekly drop on Fed stimulus outlook

The rupee completed a third weekly decline after the US Federal Reserve indicated it might slow the pace of debt purchases, fuelling concern on fund flows to emerging markets. Bonds gained for an eighth week.

On Wednesday Fed Chairman Ben S Bernanke said the central bank might cut the pace of bond purchases, known as quantitative easing, in the next few meetings if policy makers saw indications of sustained economic growth. Foreign investors have bought $14.6 billion more of Indian shares than they have sold this year, an increase of 70 per cent from a year earlier, helping meet dollar demand as a record current-account deficit pressurises the currency.

The rupee weakened 1.4 per cent this week and 0.1 per cent today to 55.6450 a dollar here, according to data compiled by Bloomberg. It touched 56.0145 yesterday, the lowest since September 6.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 55 basis points, or 0.55 percentage point, this week to 9.0225 per cent.