India Rupee Falls Most in Three Weeks as Fed Cuts Bond Purchases

India’s rupee fell the most in three weeks on concern capital inflows to emerging markets will slow as the Federal Reserve cuts its asset purchases.

The Fed reduced its monthly bond buying by $10 billion to $25 billion this week, on pace to end the program in October. The rupee also dropped as importers boosted dollar purchases to pay month-end bills. The U.S. economy expanded at a 4 percent annualized pace last quarter, after a contraction of 2.1 percent in the previous three months, data showed yesterday.

The rupee fell 0.3 percent to 60.2350 per dollar as of 10:24 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest drop since July 10. It slipped 0.1 percent this month. The currency is likely to trade between 60.15 and 60.30 today, Banerjee predicted.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 51 basis points, or 0.51 percentage point, to 5.87 percent.

Three-month offshore non-deliverable forwards fell 0.3 percent to 61.03 per dollar,  Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars