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Indian rupee weakens further on higher oil import bill fears

India's rupee fell to a 13-month low on concern near-record oil prices will boost the nation's import bill, widening the trade and current-account deficits.

  • Bloomberg
  • Published: 00:38 May 16, 2008
  • Gulf News

Mumbai: India's rupee fell to a 13-month low on concern near-record oil prices will boost the nation's import bill, widening the trade and current-account deficits.

The currency declined for a fourth day on speculation local refiners increased purchases of foreign currency required to pay for crude oil imports after the commodity in New York rose to an all-time high $126.98 per barrel this week. Asia's third-largest economy depends on shipments from abroad to meet three-quarters of its energy needs.

"The rupee's persistent weakness is mainly due to the rally in energy prices and consequent worries about the trade and current-account deficits,'' said Parthasarathi Mukherjee, treasurer at Axis Bank.

"The rupee may remain under pressure as long as the uncertainty on oil continues.''

The rupee weakened 0.6 per cent to 42.705 versus the dollar at the 5 pm close in Mumbai. The currency's 7.4 per cent loss this year is the third-worst performance among the 10 most-traded Asian currencies after the South Korean won and the Thai baht.

India's currency has fallen 8.7 per cent in the past six months as oil prices advanced 34 per cent. Oil imports rose to a record $8.6 billion in March, government data show.

The South Asian nation's trade deficit widened to an all-time high of $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.

The rupee rose earlier on speculation exporters purchased the currency as it headed for a fourth straight weekly loss.

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