Rupee falls again, completes worst month since May

The rupee fell, completing its worst month since May, on concern a stalling global recovery will crimp overseas shipments from India and cause the trade deficit to widen further.

The currency touched the weakest level in more than five weeks on Tuesday on concern that export growth might slow for a fourth month in July. The rupee pared losses after the economy expanded last quarter at the fastest pace since 2007.

“The trade deficit continues to be a worry,” said Krishnamurthy Harihar, a treasurer at FirstRand in Mumbai. “The rupee will weaken further if that is not offset by capital inflows.”

The rupee declined 1.4% this month, and 0.3% from Monday, to 47.07 per dollar at the close of trade on Tuesday. The currency has dropped 1.2% this year, the worst performance among Asia’s most-actively-traded currencies with the exception of South Korea’s won.

Offshore forward contracts indicate the rupee will trade at 47.71 to the dollar in three months, compared with expectations for a level of 47.57 on Monday and 47.08 at the end of last month.

Growth in overseas sales declined to 30.4% in June from as much as 54.1% in March. Shipments may slow further in the coming months, Rahul Khullar, secretary in the commerce ministry, said on August 17. Trade deficit in the four months through July was $43.6 billion, compared with $31.7 billion in the year-earlier period, he said. Gross domestic product rose 8.8% in the three months through June from a year earlier, after an 8.6% increase in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi on Tuesday.