The partially convertible Indian rupee fell towards 13-month lows on Tuesday on growing concerns of a deterioration in the trade deficit because of record oil prices and worries about slowing capital inflows.
At 9:35 a.m. (0405 GMT), the rupee was at 42.63/64 per dollar, nearly a quarter of a percent weaker than Friday’s close of 42.53/54 per dollar. Markets were closed on Monday for a holiday.
The rupee hit a low of 42.92 on Friday, its weakest since mid-April 2007.
"Oil is at a record and there is no signs of any relief in the near term, and outflows are a continuing worry," said Amit Garg, a currency dealer at Allahabad Bank, who expects the local unit to trade in a 42.55-42.70 band for the session.
Oil CLc1, India’s biggest import, has surged to record highs near $128 a barrel, raising the risk of the trade deficit widening. India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars.
That and signs of growth slowing as inflation has risen to 3-½ year highs have pushed the rupee down 5 percent against the dollar so far this month, taking its losses to nearly 8 percent this year.
As well foreigners have sold a net $2.7 billion of stocks this year, although so far in May they have been net buyers of about $70 million of stocks.
A Reuters poll showed investors have increased their short positions in the rupee and other Asian currencies.Goldman Sachs expects the rupee to weaken further in the near term, putting next support at 43.82 per dollar.
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