Mumbai: The rupee eased on 1 August 2007 as global investors cut positions in Indian shares and other risky assets amid a global sell-off fuelled by concerns about further deterioration in US credit markets.
The partially convertible rupee ended at 40.45/46 per dollar, down from 40.3725/3800 a day earlier, and moving away from last week’s peak of 40.20, which was its strongest since May 1998.
“The rupee moved in tandem with stocks — the market isn’t even looking at anything else at the moment,” said a dealer with a private bank.
India’s benchmark 30-share index fell nearly 4% , its biggest fall in four months, tracking declines in other equity markets on heightened fears of a US credit crunch.
The rupee has gained more than 9% this year against the dollar, buoyed by surging foreign investments into the record-breaking stock market, and a reversal of sentiment could send it lower, dealers said.
Other high-yielding Asian units like the Indonesian rupiah also fell against the dollar as investors pulled back from relatively risky assets.
US light sweet crude remained near a record $78.21 hit on 31 July. Oil is India’s biggest import, so a higher price risks widening the trade deficit and putting pressure on the rupee.
Data relased on 1 August showed India’s trade deficit for June was $7.33 billion (Rs29,700 crore), higher than $3.64 billion a year ago, as imports grew due to robust economic activity and rising oil prices.