The rupee fell sharply on Monday, driven lower by heavy losses in local stocks as a weekend spike in oil prices tripped up Asian markets and fuelled concerns of more equity outflows.
The partially convertible rupee ended at 42.87/88 to a dollar, off a low of 42.95, but still 0.5 per cent weaker than Friday’s close of 42.66/67. It hit a 13-½ month low of 43.21 per dollar in late May.
"Oil spiked dramatically over the weekend and equity has performed poorly as well. The combination of these two factors has put pressure on the rupee," a dealer with a foreign bank said.
Dealers said the Reserve Bank of India could have sold dollars in the market at around 42.93 levels to curtail a sharp depreciation in the rupee.
The BSE Sensex fell 3.25 per cent to its lowest close in nearly three months after losing as much as 4.7 per cent in intraday trade.
It shed 5.1 per cent last week and is down about 26 per cent so far in 2008. The rupee has swayed with foreign capital flows in recent years.
Foreigners have so far dumped $4.7 billion of Indian stocks this year, pushing the rupee lower by 8 per cent.
Last year, the rupee rose more than 12 percent, driven by $17.4 billion of capital inflows into the record-breaking stock market.
Oil was trading around $137 a barrel on Monday, after making its biggest-ever one-day gain in the previous session.
High oil prices could widen India’s trade deficit and increase demand for dollars from refiners, which import about 70 percent of their crude needs.
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