Mumbai: The rupee dropped to the lowest in almost 17 months on Monday, on speculation that refiners increased purchases of crude oil.
Companies, including Indian Oil Corp. Ltd, the nation’s biggest refiner, may have bought the dollar to acquire more crude after the price of oil touched the lowest in more than three months on 15 August, according to Sudarshan Bhatt, chief currency trader at Corporation Bank. The country’s markets were closed that day for a public holiday.
The rupee fell for a fifth day, the longest losing streak in more than eight months.
“Crude oil is still not at levels where Indian refiners can breathe easy and hence dollar demand is persistent,” Bhatt said. “Pressure on the rupee may increase the pace of its decline in the near term.”
The rupee weakened 1.3% to 43.60 per dollar at the 5pm close in Mumbai, from 43.06 on 14 August, according to data compiled by Bloomberg. That’s the lowest close since 29 March 2007, and the decline is the most since 16 August 2007.
The currency may decline to 44 within a month, Bhatt predicted. The rupee last slid for five days or more in a row in the?period?ended?28?November.
The price of crude oil on the New York Mercantile Exchange has tumbled 22% since 11 July, when it reached a record of $147.27 (Rs6,362 today) a barrel, reducing costs for Indian refiners. The country imports more than 70% of its annual oil needs.
The rupee’s biggest decline in more than a year was also driven partly by speculation that stock losses will deter investors from buying local assets.
The Bombay Stock Exchange’s benchmark index, the Sensex, fell for a fourth day on Monday, its worst run in a month, raising concerns that fund managers abroad will reduce their equity holdings further. The Sensex lost 0.5% to end at 14,645.66 points.
“Overseas funds are taking a cautious approach, which is reflecting in inflows slowing down,” Bhatt said. “That deprives the rupee of any support.”