The Indian rupee eased on Thursday after global crude prices inched up toward record highs, pushing up dollar demand from oil refiners to meet their month-end import commitments. The partially convertible rupee ended at 42.785/795 per dollar on Thursday off an intraday low of 42.93, and 0.12 percent weaker from its previous close of 42.73/74.
It hit a 13-month low of 43.21 last week. "The rupee weakened due to month-end dollar demand from oil companies, but a lot of state-run banks were selling below the 42.90 level," L. Subramanian, chief currency dealer at ICICI Bank, said.
Oil was trading around $130 a barrel on Thursday after hitting a record $135 last week. India imports more than two-thirds of its oil needs and higher prices inflate the trade deficit. Refiners are the biggest buyers of dollars in the local market.
A $10 per barrel increase in oil prices widens India's trade deficit by $6-$7 billion, J.P. Morgan said. Foreigners have sold $3.74 billion of stocks so far in 2008, with the index down 19.6 percent since the start of the year, after pumping in a record $17.4 billion in 2007.
"State-run banks are not expected to allow the rupee to depreciate too much and 42.50 to 43 should be the range for the rupee in the next few days," Subramanian said. Dealers also said the central bank may have intervened in the market at 42.75-42.93 levels to prevent the rupee from falling sharply.