New Delhi: The rupee declined by the most in seven weeks on concern that losses in the benchmark stock index will deter global investors.
The currency dropped to a 15-month low, extending its worst quarter in a decade, as the Bombay Stock Exchange’s Sensex index slumped to the lowest level since April 2007. Crude oil’s rally to a record on Monday renewed speculation that importers’ demand for dollars will increase as refiners pay more to buy the commodity from overseas.
“The sentiment is negative for the rupee on all fronts,” said L.V. Prasad, chief currency trader at IndusInd Bank Ltd in Mumbai. “Stocks have been down and the capital outflows combined with high oil prices have the potential to weaken the rupee further.”
The rupee fell 0.7% to 43.325 per dollar at the 5pm close of trading in Mumbai, according to data compiled by Bloomberg. That’s the lowest close since 30 March 2007.
The Sensex has dropped more than 36% this year, with overseas investors selling $6.4 billion more Indian shares than they bought, according to data provided by the Securities and Exchange Board of India. They bought a net $17.2 billion of local equities last year.
Crude oil increases costs for Asia’s third biggest economy as the nation depends on imports to meet about 75% of its annual energy needs.
Shipments overseas are likely to slow as the fastest price gains in more than 13 years prompted the government to ban exports of some food products and other commodities to contain inflation.