India’s rupee fell on speculation the country’s refiners will increase dollar purchases to pay for imports of crude oil after the commodity rose to a record.
The currency declined to near a seven-week low after oil price in New York rose to an all-time high $120.36 per barrel yesterday, stoking concern a rising import bill will widen India’s trade and current account deficits. The rupee also dropped on concern equity losses will prompt funds based abroad to slow investments in the nation’s financial market.
``With crude at $120, oil-related bids are coming in for the dollar,’’ said Vikas Babu, a foreign-exchange trader at state-owned Andhra Bank in Mumbai. ``That has kept the rupee under pressure. The market is factoring in some oil-fueled deterioration in the trade and current account balances.’’
The rupee weakened 0.2 percent to 40.68 per dollar as of 11:10 a.m. in Mumbai, according to data compiled by Bloomberg. Its 3.1 percent loss this year is the second-worst performance among the most-traded Asian currencies, after the South Korean won. The rupee’s three-month decline through April is its longest losing streak since May 2006.
Overseas purchases of oil by Asia’s third-largest economy, which imports three-quarters of its energy needs, climbed to a record $8.6 billion in March as the commodity became costlier, government data show. Crude oil has gained 95 percent in the past 12 months, according to Bloomberg data.
The South Asian nation’s trade deficit, the amount by which its imports exceed exports, rose to a record $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 in the previous three months.
Falling Stocks
The rupee also weakened as the nation’s benchmark share index declined for a second day, adding to concern funds based abroad will reduce investments in local assets.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, lost as much as 0.7 percent today, following yesterday’s 0.6 percent decline. The MSCI Asia Pacific excluding Japan Index lost 0.2 percent.
``The negative trend in the Sensex is also damping the sentiment on the rupee,’’ Andhra Bank’s Babu said.
Global investors sold Indian equities worth $2.4 billion more than they bought this year, after making net purchases worth a record $17.2 billion in 2007, according to the Securities and Exchange Board of India, the Mumbai-based capital markets regulator.
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