Business | Markets
Indian rupee hits low in eight months
The Indian rupee weakened past 41 per dollar yesterday for the first time since August as record oil prices pumped up dollar demand from refiners and heightened concerns about a widening trade deficit and rising inflation.
- Reuters
- Published: 00:09 May 8, 2008
Mumbai: The Indian rupee weakened past 41 per dollar yesterday for the first time since August as record oil prices pumped up dollar demand from refiners and heightened concerns about a widening trade deficit and rising inflation.
At 0435 GMT, the partially convertible rupee was at 41.19/20 per dollar, the lowest since August 30, according to Reuters data. It ended at 40.95/96 on Tuesday.
Oil rose to a record high of $122.73 a barrel on Tuesday. India imports 70 per cent of its oil needs, and crude refiners such as HPCL and BPCL are among the biggest Indian buyers of dollars.
"Oil has hurt sentiment and pushed all importers to buy dollars," a trader with a state-run bank said.
Higher costs for oil were one factor behind a 35.5 per cent widening in India's trade deficit for 2007/08 (April-March) to $80.4 billion. Annual inflation hit 7.57 per cent on April 19, its highest in more than three years, and any pass-through of oil or other commodity prices could push it higher.
Traders also said a few banks sold rupees in an arbitrage play to take advantage of weaker rates in the overseas non-deliverable forward (NDF) market. Traders said the difference had narrowed to around Rs0.02-0.03 in some forward rates.
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