India’s rupee fell the most in nine months on speculation record crude oil prices will widen the nation’s trade and current-account deficits, increasing demand for foreign currencies.
The rupee declined to the lowest since April 2007 as local refiners increased dollar purchases to pay for imports of crude, which reached an all-time high of $126.98 a barrel in New York yesterday. The currency also weakened after data from India’s capital markets regulator showed overseas investors added to sales of local equities.
``The rupee’s depreciating bias continues as oil prices remain high, raising concern about wider trade and current- account deficits,’’ said Agam Gupta, head of trading at Standard Chartered Plc’s Indian unit in Mumbai.
The rupee weakened 1.2 percent to 42.6150 per dollar as of 2:18 p.m. in Mumbai and reached 42.6775, according to data compiled by Bloomberg. The currency is the third-worst performer among the most-traded Asian currencies outside Japan this year, losing 7.5 percent.
India’s currency has fallen 7.7 percent in the past six months as oil prices advanced 33 percent. India’s oil imports rose to a record $8.6 billion in March, government data show. Asia’s third-largest economy depends on shipments from abroad to meet three-quarters of its energy needs.
Trade Deficit
The South Asian nation’s trade deficit widened to an all- time high of $25.4 billion in the three months through December, according to the central bank. The current-account shortfall, a measure of trade and investment flows, increased to $5.4 billion in the same quarter from $4.7 billion.
Funds based abroad sold $2.8 billion more Indian equities than they bought this year, after making net investments worth a record $17.2 billion in 2007, according to data released by the Securities and Exchange Board of India.
The rupee, which fell past the 42 per dollar level this week for the first time since April 2007, extended losses following a series of bomb blasts in the northern Indian city of Jaipur. Eight explosions killed as many as 60 people and injured another 200 yesterday in the country’s deadliest terrorist attack in more than a year.
``It’s an incident that has happened, a one-off incident, and may not really affect foreign investment inflows,’’ Standard Chartered’s Gupta said. ``If the rupee had been in an appreciating trend, we could have asked whether it’d face a setback. But since the rupee is already in a depreciating trend, we may not see much of a difference.’’
Source: Bloomberg
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