Rupee down as oil cos buy dlrs; shares weigh

Enlarge Photo A man uses an electronic machine to check a currency note at a money exchange...

Thu, Jul 24 05:55 PM

By Swati Bhat

MUMBAI (Reuters) - The rupee shed early gains to close weaker on Thursday, as oil companies bought dollars from the local currency market to fund their import commitments, while losses in local shares also weighed.

The partially convertible rupee ended at 42.13/14 per dollar, off an early high of 41.82, its highest since May 12, and 0.1 percent lower than 42.09/10 at Wednesday's close.

"Oil companies bought dollars in the market after a long time today, while profit-booking was also another reason why the rupee weakened," said L. Subramanian, chief dealer with ICICI Bank.

"If oil prices soften to about $120 per barrel then the rupee would not depreciate much, but technically it could go down to 42.47 levels," he added.

Oil, India's biggest import, was trading just above $124.5 per barrel, after having touched a record $147.27 earlier this month.

Oil refiners used to be the biggest buyers of dollars until the Reserve Bank of India started providing them with foreign exchange in June to ease their liquidity concerns, a move which took some pressure off the rupee.

Dealers said a report on a newspaper website of lower than expected annual inflation of just below 11.9 percent in the week to July 12 also helped boost sentiment for the rupee.

Official data is due at 6 p.m.

Indian shares fell 1.1 percent, snapping a five-day winning streak where they had risen nearly 20 percent, led by export-focused outsourcers after the rupee rose to its intraday high.

Foreigners have so far this year sold a net $6.6 billion worth of India stocks, a crucial factor in the rupee's 6.5 percent decline in 2008.

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