New Delhi: The rupee weakened for the seventh day, the longest stretch in more than three years, on speculation that refiners stepped up purchases of dollars to settle import bills due by the end of the month.
The currency dropped to the lowest in a month as rising crude oil prices increased demand for dollars. The commodity has climbed more than 60% this year to a record in New York, raising the cost of imports for Asia’s third biggest economy, which depends on shipments from overseas to meet three-fourths of its energy needs.
“The demand in the last few days of the month for dollars will outweigh benefits from a rally in stocks,” said Puneet Sharma, chief currency trader at state-owned Allahabad Bank in Mumbai. “The rupee is likely to weaken in the immediate term.”
The currency declined 0.2% to close at 39.78 against the dollar in Mumbai, according to data compiled by Bloomberg. It may weaken to 39.80 this week, Sharma said.
Indian Oil Corp. Ltd, the country’s biggest oil refiner, and others typically settle their import bills at the end of every month, causing a spurt in demand for dollars.
The currency completed the longest losing streak in 15 months on 23 November as overseas funds turned net sellers of stocks last week. Global funds, which bought a net record $18 billion (Rs71,280 crore) of Indian stocks and bonds this year, helped push the rupee to the highest in almost a decade on 7 November, the Bloomberg data show.
The currency earlier rebounded as much as 0.3% to 39.57 from the lowest in a month as a rally in Asian stocks spurred optimism global funds will return to buy Indian equities.
The currency gained the most in more than two weeks after a report showed US shoppers increased spending on the day after Thanksgiving, easing concerns about slower growth in the world’s biggest economy.
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, tracked its Asian peers and climbed 2.1%. India’s 10-year bond yield held near the highest in two weeks as overnight cost of money rose, making it more expensive to buy debt with borrowed funds.