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Rupee falls on higher demand for dollars

Rupee falls on higher demand for dollars
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First Published: Wed, Mar 05 2008. 11 21 PM IST
Updated: Wed, Mar 05 2008. 11 21 PM IST
Mumbai: The rupee declined on speculation that importers took advantage of gains in the Indian currency to buy dollars needed to pay bills.
The rupee is the worst performer among the 10 most active currencies in Asia this year, as the trade deficit widened to a record in January with imports growing faster than exports. Refiners including Indian Oil Corp. Ltd may have increased purchases of the US currency after crude oil rose to a record this week.
“Demand increased for the dollar after the rupee gained in the morning,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “We saw quite a bit of import-related dollar buying today.”
The rupee weakened to 40.3175 per dollar at close, from 40.3175 on Tuesday, according to Bloomberg data. It rose as high as 40.215 earlier.
India’s monthly trade shortfall increased to an all-time high of $9.4 billion in January from $5.4 billion in the previous month, the commerce ministry said on 3 March. Imports climbed 64%, compared with a 21% increase in exports.
The rupee advanced after finance minister P. Chidambaram said limits on overseas borrowings by local companies are “temporary”. It also gained after the benchmark share index gained, snapping four days of losses and tempering concerns that global investors will sell local equities.
“The finance minister’s comment on external borrowings raises the prospect of bigger foreign-exchange inflows,” said Rohan Lasrado, a currency trader at HDFC Bank Ltd. “The reversal in the rupee prompted exporters, who were waiting for more rupee losses, to sell their dollars.”
Last August, India imposed curbs on firms seeking to borrow from overseas to slow capital inflows that pushed the rupee to a nine-year high.
Meanwhile, the benchmark bonds advanced on speculation demand for the securities increased after yields climbed the most in more than a week on Tuesday.
Banks and securities companies may have increased purchases after the yield on debt maturing in 2017 climbed five basis points on Tuesday, the most since 22 February. Bonds also gained on speculation that lower interest rates will encourage investors to buy debt with borrowed funds.
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First Published: Wed, Mar 05 2008. 11 21 PM IST