Mumbai: The Indian rupee weakened on Friday as oil prices held close to $120 per barrel after rebounding from three-month lows in the previous session raising worries of higher trade deficit.
At 10 a.m, the partially convertible rupee was at 42.17/18 per dollar, off an early low of 42.25 and 0.2% weaker than 42.075/080 at close on Thursday.
A senior dealer with a private bank said there was short-covering of dollar positions after the rupee met with resistance at 41.9 in the previous day.
“The rupee should stay in a band of 42.10 to 42.35 for the rest of the session,” he said.
Oil prices broadly held steady near $120 a barrel on Friday, rebounding from three-month lows due to an attack on a one million barrel per day pipeline in Turkey, but bearish demand sentiment prevailed.
Dealers said they would be watching the stock market, which would provide cues on foreign fund flows. Outflows in recent months have been weakening a key support for the rupee, and is a major factor in the rupee’s 6.5% decline against the dollar so far in 2008.
Indian shares opened 0.5% lower and seesawed in early trade, after annual inflation topped 12% for the first time in 13 years and analysts said it was yet to reach a peak.
One-month offshore non-deliverable forward contracts were quoting at 42.26/36, weaker than the onshore rate.