Mumbai: The Indian rupee dropped to a fresh 13-month low on 14 May, pulled down by record-breaking oil prices and growing worries about a slowdown in the economy which may deter foreigners from investing in the stock market.
At 10:34 a.m. (0504 GMT), the partially convertible rupee was at 42.35/36 per dollar, a level last traded on 16 April, 2007, according to Reuters data, and 0.5% weaker than previous close of 42.10/11. The rupee has fallen 1.7% this week, and nearly 7% this year.
“There was some huge offshore-related dollar buying in the non-deliverables market which is having a ripple effect on the local markets, and the bomb blasts may have some effect on the stock opening,” said a senior trader at a state-run bank.
Eight bombs ripped through bustling streets of the western city of Jaipur on Tuesday evening, killing around 60 people, and injuring 150.
One-month offshore non-deliverables forwards were quoting at 42.45/55 per dollar, weaker than the onshore rate, with traders saying there was talk hedge funds were exiting rupee positions.
Soaring oil prices also hurt sentiment that surged to a record near $127 after OPEC producer Iran said it was studying a plan to cut output. High global oil prices raise the risk of widening India’s trade deficit and putting downward pressure on the rupee.
The Sensex has tanked about 17% in 2008. Foreign funds have been net sellers of more than $3 billion of stocks this year, a sharp turnaround from record buying of $17.4 billion in 2007.
DBS Bank said in a report that it was the first time in a decade that foreign investors had been net sellers on a year-to-date basis of Indian stocks by early May.