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Re falls as strong oil spurs dollar demand

Re falls as strong oil spurs dollar demand
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First Published: Fri, May 30 2008. 12 30 AM IST
Updated: Fri, May 30 2008. 12 30 AM IST
Mumbai: The rupee fell on Thursday on speculation that refiners and other importers exchanged the currency for dollars to settle month-end bills.
The rupee headed for its biggest monthly decline in more than a decade as refiners paid more for a barrel of crude oil after futures prices on the New York Mercantile Exchange more than doubled in the past year to a record $135.09 on 22 May. The local currency fell as overseas investors sold more local equities this year than they had bought, concerned that growth in Asia’s third largest economy was slowing.
“We are experiencing stronger dollar demand this month because of the rise in oil prices,” said Roy Paul, assistant manager of treasury at Federal Bank Ltd in Kochi.
“Importers aren’t leaving payables uncovered, which has pushed demand for forward dollars as well.”
The rupee dropped 0.1% to 42.785 a dollar at close in Mumbai, according to data compiled by Bloomberg. It may fall to 43.40 in the next few days, Paul said.
Contracts that allow traders to bet on the rupee’s value in 12 months versus the dollar have slumped 8% since 18 April in the offshore non-deliverable forward market. Non-deliverable contracts are used for currencies that can’t be freely converted and are settled in dollars.
The rupee may extend losses as a government report on Friday may add to evidence growth is slowing, Paul said.
The economy expanded 8.1% in the three months to 31 March from a year earlier, less than the previous quarter’s 8.4% gain, according to the median forecast of 20 analysts in a survey.
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First Published: Fri, May 30 2008. 12 30 AM IST