Rupee Weakens to 13-Month Low as Dollar Rises

India’s rupee dropped to the weakest level since November 2013 on speculation demand for emerging-market assets will suffer as global growth falters and investors prepare for higher U.S. interest rates next year.

The Federal Open Market Committee ends a two-day meeting on 17 December at which the path of increases in borrowing costs will be discussed. The euro area reports inflation after weaker-than-estimated purchasing managers’ indexes in Germany and France and a warning from Bank of England Governor Mark Carney that a global slowdown threatens financial stability.

The rupee fell 0.3 percent to 63.73 a dollar in Mumbai after earlier reaching 63.8850, the lowest level since Nov. 13 last year, according to prices from local banks. The currency pared losses as state-run banks sold dollars, three Mumbai-based traders said, asking not to be identified. Indian government bonds dropped.

The yield on the Indian sovereign bonds maturing July 2024 rose two basis points, or 0.02 percentage point, to 8.01 percent, prices from the Reserve Bank of India’s trading system show. One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, climbed four basis points to 7.96 percent.

Three-month offshore non-deliverable forwards for the rupee declined 0.5 percent to 64.82 a dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.