Rupee drops after Fed disappoints

The rupee fell the most in more than a week after US policy-makers refrained from announcing more steps to spur growth, damping demand for riskier assets.

The rupee declined 0.7 per cent to 55.84 per dollar in Mumbai, the biggest drop since July 23, according to data compiled by Bloomberg. The currency touched 55.90 earlier, the weakest level since July 26. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 10 basis points, or 0.10 percentage point, to 11.40 per cent.

Three-month onshore rupee forwards traded at 56.81 per dollar, compared with 56.54 yesterday, and offshore non-deliverable contracts were at 56.88 from 56.50. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.

The European Central Bank reviewed policy later in the day. But the bank did not change interest rates. Last week President Mario Draghi’s had pledged to do “whatever it takes” to preserve the euro.

Call rates steady
Overnight call money rates closed stable as demand from borrowing banks matched supplies. The rate finished stable at eight per cent, it moved in a range of 8.10 per cent and 7.90 per cent.

The Reserve Bank of India under the Liquidity Adjustment Facility purchased securities worth Rs 26,015 crore in 18 bids at the one-day repo auction, at a fixed rate of eight per cent.