Rupee continues to slide

India's rupee fell after Spain's credit rating was cut, adding to concern Europe's debt crisis will worsen and damp demand for emerging-market assets. Moody's Investors Service lowered Spain's rating three steps to Baa3 yesterday, citing an increased debt burden, a weakening economy and limited access to capital markets. Greece will hold elections this weekend, which may determine if the country stays in the euro. The rupee could reach a record low of 58.50 per dollar in the "coming months" if the European situation deteriorates, according to Mizuho Corporate Bank Ltd. "The rupee is being clobbered by global risk aversion," said Vishnu Varathan, a Singapore-based economist at the Japanese lender. "In the near term, this will be the driving factor for inflows, though the Indian authorities are likely to take measures to protect growth."The rupee declined 0.1 per cent to 55.7600 per dollar as of 9:59 am in Mumbai, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 12 percent. The Reserve Bank of India will lower its benchmark repurchase rate to 7.75 percent from 8 percent at a review on June 18, according to 17 of 23 analysts in a Bloomberg News survey. Two expect a reduction to 7.5 percent and four predict no change. Industrial production increased 0.1 percent from a year earlier in April, official data showed this week, compared with the 1.7 percent median estimate in a Bloomberg News survey. Wholesale prices probably rose 7.50 percent in May, compared with 7.23 percent in April, according to the median estimate in another Bloomberg survey before data due at noon today in Mumbai. Three-month onshore currency forwards traded at 56.66 per dollar, compared with 56.55 yesterday, and offshore non- deliverable contracts were at 56.85 from 56.68. Forwards are agreements to buy or sell assets at a set price and date. Non- deliverable contracts are settled in dollars.from gulfnews.com