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The Indian rupee declined to a new all-time low after data showed a sharp slowdown in the economic growth. Bonds extended gains on bets the central bank may cut interest rates sooner than anticipated.
The rupee fell over 0.2% to 84.6850 per dollar after a government report on Friday showed the economy grew at the slowest pace in almost two years. A stronger dollar spurred by US President-elect Donald Trump demanding a commitment from the so-called BRICS nations to using the greenback also weighed on emerging-market assets.
India’s five-year bond yield fell nearly six basis points to 6.62% as traders continued to bet on easing measures by the Reserve Bank of India, which is due to announce its rate decision on Dec. 6. Stocks traded lower.
Economists from Goldman Sachs Group to Barclays Plc cut their full-year growth outlook after the GDP data missed estimates on Friday. This is while inflation stays above the central bank’s 4% target level.
“The bond rally is durable to some extent, especially on the shorter end of the curve, if the RBI surprises with a rate cut on Friday,” said Harsimran Singh Sahni, head of treasury at Anand Rathi Global Finance. “It’s a toss if the RBI will ease or not on Friday,” with traders expecting everything from a cut in cash-reserve ratio to bond purchases to support liquidity, he said.
(Updates with analyst comment in sixth paragraph)
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