Business | Economy
Indian currency slides to near 15-month low
India's rupee fell to near a 15-month low on concern oil prices at a record high will widen the nation's current-account deficit, boosting demand for dollars.
- Bloomberg
- Published: 00:07 July 4, 2008
Mumbai: India's rupee fell to near a 15-month low on concern oil prices at a record high will widen the nation's current-account deficit, boosting demand for dollars.
The currency headed for its worst week since the five days through May 16 after crude oil in New York climbed to an all- time high of $145.85 a barrel yesterday. India imports 70 per cent of its oil requirement. The rupee also weakened after the benchmark stock index tumbled, erasing almost all of its gains yesterday. Losses in equities spurred speculation overseas funds will pull their money out of the country.
"Oil is at a record again and that will only increase pressure on the rupee" to fall, said Rohan Lasrado, a foreign- exchange trader at HDFC Bank Ltd. in Mumbai. "We will see more dollar buying because of a rising import bill."
The rupee declined 0.3 per cent to 43.305 per dollar at the 5pm close of trading in Mumbai, according to data compiled by Bloomberg. Its 9 per cent loss this year is the fourth-worst among Asia's 10 most-traded currencies outside of Japan. "The currency may weaken to as low as 44 in the coming months," Lasrado said.
The cost of crude oil, which more than doubled in the past 12 months, will climb to $170 a barrel before the end of the year, the president of the Organisation of Petroleum Exporting Countries (Opec) Chakib Khelil said on June 28.
India paid an average $7.7 billion a month on oil imports this year, compared with $5.4 billion in 2007, government data show. The shortfall in the current account increased 78 per cent in the financial year through March to a record $17.4 billion, a central bank report showed on June 30.
Falling stocks
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, fell 4.2 per cent yesterday, heading for a seventh weekly decline. The index has lost 35.5 per cent this year, following a 47 per cent advance in 2007.
Overseas investors sold $6.5 billion more in Indian shares than they bought this year, more than a third of their record net purchases of $17.2 billion in 2007, data provided by the Securities & Exchange Board of India show.
"There's still a lot of money in India and the risk is that more will flow out this year," said Irene Cheung, a Singapore-based currency strategist at ABN Amro Bank NV.
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