Mumbai: The rupee declined by the most in three months on speculation global stock losses will spur investors to pare riskier emerging market assets.
The rupee fell to the lowest level in almost a month as Wednesday’s 2.7% jump in crude oil prices renewed speculation refiners such as Indian Oil Corp. Ltd, the nation’s largest, will buy more dollars. A 27% drop in the benchmark stock index has prompted global funds to exit the market as it heads for the first annual loss since 2001.
“Global equity markets are still volatile and funds are going to pull out more money from emerging economies like India,” said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd in Mumbai. “I expect outflows from India for the next three months and that is going to weaken the rupee.”
The rupee fell 1% to 43.055 per dollar at the 5pm close, the lowest since 16 July, according to data compiled by Bloomberg. It may fall to 43.5 in a month, Rajagopal said.
Overseas funds sold $6.6 billion (Rs28,248 crore) more of local shares than they bought this year, compared with net purchases of a record $17.2 billion in 2007, according to the Securities and Exchange Board of India, or Sebi.
The Bombay Stock Exchange Sensitive Index, or Sensex, fell 2.4%, the most in more than two weeks.
The MSCI Asia Pacific Index fell 0.5%, a third day of declines. The gauge has slumped 20% this year.
The rupee also fell as refiners, who depend on imports to meet three-quarters of their annual crude oil needs, paid more for shipments of the commodity this year. Crude oil advanced the most on Wednesday since 30 July.
“India’s oil imports are high and dollar demand from refiners is still strong,” Kotak’s Rajagopal said. “Crude oil prices are still at elevated levels.”
The country’s monthly oil imports averaged $8 billion this year, compared with $5.45 billion in 2007, government data show.
India allowed the National Stock Exchange of India,the nation’s biggest bourse,to start trading currency futures, Sebi said on Wednesday. Currency futures are publicly traded derivatives that allow investors to trade a currency on a future date at a fixed price.
Anil Varma conributed to this story.