Rupee weakens as importers chase dollar.

The rupee weakened, snapping a three-day advance, on speculation the refiners stepped up dollar purchases to pay for costlier crude oil imports.

The rupee declined 0.1% to 46.4525 per dollar at the close of trade on Tuesday. It touched 46.245 on Monday, the strongest level since August 10. Oil companies may have increased purchases of the greenback after the commodity rose almost 7% this month, heading for the biggest gain since February. India buys almost three-quarters of the oil it uses. The value of shipments has averaged $7.9 billion a month this year, up from $5.2 billion a year earlier, government data show.

“There’s a good deal of dollar demand, particularly from oil companies, and that has pressured the rupee lower,” said Sudarshan Bhatt, Mumbai-based chief foreign-exchange trader at Corporation Bank. “We may see the rupee moving further down tomorrow.” Offshore forwards indicated the rupee will trade at 47.01 to the dollar in three months, compared with expectations of 46.91 on Monday.

The local currency strengthened earlier after overseas investors raised holdings of stocks and bonds to record levels. Foreigners have increased ownership of Indian equities by $13.7 billion this year, 57% more than in the year-ago period, to $86.5 billion on September 10. Debt investments more than doubled to $16.4 billion as five-year bond yields touched a 23-month high.

The rupee is “likely to remain attractive on both growth and yield parameters,” Vivek Kumar and Shubhada Rao, Mumbai-based analysts at Yes Bank, wrote in a research note. “Near-term pressures on the rupee will persist from spurts in global risk aversion. This would make movements choppy.” The government reported on September 10 that factory output rose 13.8% in July from a year earlier, compared with the 5.8% pace in June.

Source : economictimes.indiatimes.com