India's Rupee Falls to 13-Month Low as Companies Sell Currency

India’s rupee fell to a 13-month low on speculation importers sold the currency to limit losses following its biggest slide since August.

The rupee’s 1 percent decline yesterday added to last week’s 2.3 percent drop, the most in a decade, as near-record energy prices increased demand for dollars needed to buy crude oil. A falling rupee makes imports costlier. The currency also fell as exporters held back sales of dollars earned overseas, expecting to profit from further currency declines.

``The rupee is under pressure as there’s widespread demand for the dollar, from oil companies and all sorts of importers,’’ said Rohan Lasrado, a foreign-exchange dealer at HDFC Bank Ltd. in Mumbai. ``The market is clearly nervous because there’s just no supply of dollars. Exporters are canceling contracts to sell the dollar because they want to wait for better rates.’’

The rupee weakened as much as 0.4 percent to 42.2125 per dollar, the lowest since April 19, 2007, before trading at 42.135 as of 11:21 a.m. in Mumbai, according to data compiled by Bloomberg. The currency, which declined in five of the past six weeks, is Asia’s second-worst performer this year after the South Korean won.

The Indian currency may fall as low as 42.50 in a week amid concern costlier oil is inflating India’s import bill, Lasrado said. Crude oil in New York more than doubled to reach an all- time high of $126.40 a barrel yesterday.

Oil Imports

The value of India’s oil imports rose to a record $8.6 billion in March as the commodity became more expensive, government data show. The nation’s trade deficit widened to a record $25.4 billion in the three months through December, according to the central bank. Asia’s third-largest economy depends on imports to meet three-quarters of its energy needs.

The rupee also fell as the flow of overseas funds into the local equity market declined, HDFC’s Lasrado said. Such inflows helped the rupee rally 12.3 percent in 2007, the most in more than three decades.

Overseas investors sold $2.8 billion more Indian shares than they bought this year, after making record net purchases of $17.2 billion in 2007, according to the Securities and Exchange Board of India.

A government report showed yesterday India’s industrial production expanded at the slowest pace in six years in March, adding to concern overseas investors will scale back stock purchases.

The rupee weakened past 42 a dollar yesterday for the first time since April 2007 after the government said the annual pace of increase in output at factories, utilities and mines more than halved to 3 percent in March from 8.6 percent in the previous month.

``The industrial output report definitely remains at the back of traders’ minds,’’ HDFC’s Lasrado said. ``Especially since the market is receiving no capital flows.’’