Mumbai: The rupee fell to a five-month low on Wednesday, as dealers sold the local unit aggressively to meet dollar demand from overseas investors who withdrew some funds on concerns about the global economy.
At 10:10 am, the partially convertible rupee was at 40.065/075 per dollar, down from its previous finish of 39.91/92 per dollar.
It had last traded at 40 per dollar on 20 September.
“It’s hard to meet the demand for dollars at the moment, especially with no real inflows, which is putting a lot of pressure on the rupee,” said the chief dealer with a corporate.
India’s benchmark share index fell more than 1% in early deals on Wednesday, taking cues from weak Asian equities, with Japan’s Nikkei average falling more than 2%, as investors locked in profits amid economic concerns.
Markets were cautious after oil prices surged to a record high above the $100 mark, which sparked fears of higher inflation in a US economy already struggling with the credit crisis.
A dealer said demand for dollars from an oil company put further pressure on the local unit.
Oil is India’s largest import, and rising crude prices usually exert downward pressure on the rupee.
Some dealers said that the rupee’s losses would be capped around 40.25 by exporters, who would likely sell their dollar holdings at around those levels.
“Exporters understand that the rupee is going to move down before it moves up again, and they’re going to wait for a while for the best rate,” said a dealer with a foreign bank.