Mumbai: The rupee dropped on 8 May, ending three days of gains, after importers used the currency’s rise on 7 May to purchase dollars.
The Indian currency’s advance on 7 May to the highest since May 1998 means importers such as Indian Oil Corp. Ltd, the nation’s largest refiner, have to convert less in rupees for foreign exchange. Such savings in costs is important for Asia’s fourth-largest economy as it meets 75% of its annual energy needs from abroad.
“Importers bought dollars to meet payment obligations of short-term nature,” said Pankaj Sharma, chief currency trader at state-owned Union Bank of India Ltd in Mumbai. “Dollar demand pressure got strengthened because the rupee wasn’t rising in a sustained manner today.”
The rupee fell to 40.8475 against the dollar as of the 5pm close in Mumbai, after rising to as much as 40.72 earlier on Tuesday, according Bloomberg. It rose to 40.545 on Monday, the highest in intraday trade since May 1998.
The Indian unit rose earlier on speculation that investors abroad will buy local stocks to benefit from rising profit.
“Fund flow from abroad is persistent and is outpacing the local dollar demand,” said Sudarshan Bhatt, chief currency trader at Corporation Bank, in Mumbai. “I expect the rupee to appreciate further in coming days.”