Mumbai: The Indian rupee slipped to one-week lows on Tuesday, 18 September weighed down by weaker Asian stock markets and oil prices that hovered near record highs.
Volume was subdued as traders waited for the outcome of a US Federal Reserve meeting where it is widely tipped to lower its federal funds rate by 25 basis points to 5%, but some analysts are expecting a deeper cut. The decision is likely by 1815 GMT.
At 9:42am (0412 GMT), the partially convertible rupee weakened to 40.60/61 per dollar from 40.56/57 at Monday’s close. It hit a nine-year high of 40.20 in July.
“Global indicators such as stocks and oil prices are not looking very positive and the rupee is mirroring that,” said Vikas Babu, a currency dealer at Andhra Bank.
Oil prices rose to a record high above $81 a barrel on Tuesday on concerns of a winter supply squeeze. India imports nearly 70% of its oil and high prices directly impacts its current account deficit.
Prices have risen from around $60 from the start of 2007 and JP Morgan estimates that for every $10 rise in oil prices, it increases India’s annual oil import bill by $7 billion.
Asian stocks fell as financial shares lost ground amid concern about spreading turmoil in credit markets. For related story, see [ID:nHKG353408].
“It looks to be a 40.55-40.68 band before the Fed decision,” Babu said.