Mumbai: The rupee slipped sharply on Thursday, as near-record oil prices and a decline in local equities that tracked sliding markets across Asia dampened appetite for the rupee, dealers said.
At 10:15 am, the partially convertible rupee was trading at 40.57/58 per dollar, weaker than Wednesday’s close of 40.33/34.
“Today, stocks in Asia are weak and crude oil is up,” said a senior trader with a state-run bank.
India’s main share index opened 2.9% lower, in line with other regional indices and following a retreat on Wall Street, with investor sentiment hit by heightened fears of a recession in the United States.
Japan’s Nikkei was trading down more than 3%, as optimism about the Federal Reserve’s latest attempt to ease tight credit conditions subsided.
The US Fed announced on Tuesday it would be injecting up to $200 billion in liquidity into strained credit markets. Four other major central banks said they too were taking steps.
Near-record oil prices raised the prospect the rupee would decline further, dealers said.
Light crude oil for April delivery continued to trade within sight of Wednesday’s record high of $110.20 per barrel.
India imports more than two-thirds of its oil. Rising crude prices would widen the trade deficit and could put downward pressure on the rupee.
“Also, major foreign banks have been buying dollars today, probably because their clients are selling stocks,” the trader said.
Inflows of overseas funds into Indian equities are a key driver of the rupee. But foreigners have sold a net $369 million in local shares so far this month, pushing the rupee lower, after pouring $17.4 billion into equities in 2007.