Indian rupee extends fall on importer payments, weak shares

Tuesday, 28 February 2012 00:00 - - {{hitsCtrl.values.hits}}

MUMBAI,(Reuters): The Indian rupee extended its decline in afternoon trading on Monday as a drop in stock prices and strong dollar-demand from domestic oil companies negated strong capital inflows. At 2:04 p.m. (0834 GMT), the rupee was at 49.09/10 to the dollar, down from Friday’s close of 48.935/945.

With India importing about 80 percent of its oil requirements, oil companies are the biggest buyers of dollars in the local currency market.

Buying by oil companies has increased in the last few days as rising tensions between Iran and the West have pushed oil prices higher on fears of supply disruptions. Iran is a key supplier to India. Brent crude slipped below $125 per barrel on profit-taking after hitting a 10-month high. Robust foreign inflows and expected intervention from the Reserve Bank of India (RBI) should help prevent any sharp slide in the rupee, traders said. In December, the RBI sold more than $9 billion in the spot and forwards markets, its biggest intervention in nearly three-and-half years, after the rupee hit a record low of 54.30.

Foreign funds have invested more than $9 billion in Indian equities and debt so far in 2012, according to the Securities and Exchange Board of India.