India's Rupee Falls as Rising Oil Increases Demand for Dollars

India’s rupee fell on speculation crude oil near a record high will increase demand for dollars needed to pay for the commodity.

The local currency extended a four-week decline as companies including Indian Oil Corp., the nation’s biggest refiner, stepped up dollar purchases after oil became costlier by almost 33 percent this year. Energy costs may also widen the nation’s current-account deficit as Asia’s third-largest economy ships in three-quarters of the oil it needs from overseas.

``Importers are more aggressive in buying dollars due to the rapid increase in oil,’’ said Indrajit Sengupta, a currency trader at state-owned Canara Bank in Mumbai. ``Since there is no matching dollar supply, the rupee will be under pressure in the near term.’’

The rupee declined 0.2 percent to 42.595 per dollar at the 5 p.m. close in Mumbai, from 42.5125 on May 16, according to data compiled by Bloomberg. Markets were closed yesterday for a holiday.

The value of oil imports in the 12 months through March climbed 23.5 percent to $71.8 billion from a year earlier, helping widen the trade deficit to $80.4 billion. The current- account shortfall widened to $5.4 billion in the three months ended Dec. 31 from $3.7 billion a year earlier and $4.7 billion in the preceding quarter, the central bank said on March 31.

Exporters Purchase

Crude oil traded above $127 a barrel in after-hours trading on the New York Mercantile Exchange after touching an all-time high of $127.82 on May 16.

The local currency pared losses on speculation exporters purchased the currency as it traded near a 13-month low. A weaker currency increases the income of exporters when they repatriate their earnings.

``The dollar was finding it difficult to rise beyond a point which probably prompted exporters to sell,’’ said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd. in Mumbai. ``That helped the rupee recover some ground.’’

The local currency fell 2.3 percent in the week through May 9, the most since 1998, and extended its decline by 2.2 percent last week, Bloomberg data show.