Mumbai: The rupee fell past 43 a dollar for the first time in more than 13 months on Thursday, 22 May, taking its losses in 2008 to nearly 9% as record crude prices heightened concerns of a worsening trade deficit.
India imports 70% of its oil and refiners are the biggest buyers of dollars, with their demand tending to peak at month-end.
Support for the rupee has already been weakened by foreigners turning net sellers of stocks in 2008, after record buying last year, and worries over slowing growth have also weighed.
At 10:52am, the partially convertible rupee was at 43.18/19 per dollar, its weakest since 6 April 2007, and 0.8% weaker than the previous close of 42.83/84.
The rupee has fallen more than 6% so far in May and 8.8% this year, to be one of the the weakest currencies in Asia. It rose more than 12% against the greenback in 2007.
“The rupee’s fall is because of oil hitting a new record and markets expecting stock markets to fall sharply, which may affect capital inflows,” said Roy Paul, assistant general manager at Federal Bank in Kochi.
Oil surged to a record high of above $135 on Thursday and analysts expect the rupee to weaken further to reflect the widening trade gap. Oil imports rose by more than a third in 2007-08 because of high prices, and the trade deficit has also widened by a similar percentage.
Foreign flows in the stock market, a key influence on the rupee, have turned around this year, with net outflows of $2.7 billion this year after record inflows of $17.4 billion in 2007.
The Sensex fell 2% in morning trade. It is down more than 16% this year, after rising 47% last year.