Mumbai: The rupee weakened as refiners scrambled to meet month-end import commitments, but cautiousness over central bank intervention prevented the Indian unit from falling sharply.
The partially convertible rupee was at 43.77/78 a dollar, 0.1% weaker than yesterday’s close of 43.71/72. On Tuesday, it hit a 17-month low of 44.26. The rupee is down 9.9% so far in 2008.
“There is nothing specific happening in the market as yet, just month-end oil demand. However, the central bank is expected to step in, if the rupee falls towards 44,” a senior dealer with a private bank said.
Higher demand for dollars from oil firms in the last two sessions pushed the rupee below 44 on Tuesday for the first time in nearly a year and half, forcing the Central Bank to step in and help it recover some of the losses.
With oil rising to nearly $119 a barrel, import payments will rise, widening the trade deficit further in a country which buys more than two-third of its oil.
Traders were also watching the stock market for cues on fund flows. Foreigners have been net sellers of $7.4 billion of stocks so far in 2008 after buying a record $17.4 billion last year.
India’s main share index opened down 0.05% but soon turned positive, but trade is expected to be choppy due to higher oil prices and ahead of inflation data due later in the day.