Mumbai: The Indian rupee fell to its lowest in nearly four weeks on Thursday as higher oil prices raised worries of a widening trade deficit and larger dollar demand from oil refiners.
At 10:10 a.m., the partially convertible rupee was at 42.88/89 per dollar, its lowest since 18 July and 0.5% weaker than 42.65/66 at close on Wednesday. The rupee has shed nearly 2% in the last four sessions.
“The rupee is weaker mainly because of higher oil prices while lower stocks are also hurting sentiment,” said a senior dealer with a private bank.
“However, there are some state-run banks selling dollars at around 42.87-88 levels, so rupee should stay in a band of 42.75-42.88 at least in initial trade,” he said.
Indian shares opened 0.5% lower and soon extended losses to more than 1% after oil prices climbed to nearly $117 per barrel, which could trigger inflation expectations and tighter monetary policy.
Oil rose nearly $1 on Thursday, extending gains of $3 in the previous session, as a larger-than-expected drawdown in crude and gasoline stocks in the United States rekindled supply concerns.
India imports nearly 70% of its crude and higher prices widen the country’s trade deficit. It also means refiners would need to pay more dollars for the same amount of oil, spurring dollar demand and weakening the local currency.
India’s annual inflation is forecast to have risen 12.21% in the 12 months to 2 August , which would be the highest in more than 13 years, a Reuters poll of 11 economists showed on Wednesday.