Rupee Weakens on Talk of Importers Chasing Dollar.

The rupee weakened, snapping a six-day gain, on speculation importers stepped up dollar purchases to settle month-end bills.

The currency also declined on speculation the Reserve Bank of India will seek to curb the biggest monthly advance since May 2009 to protect export earnings. India’s import growth quickened to 34.3% in July from 23% in the previous month, while gains in overseas sales slowed to 13.2% from 30.4%.

“Negative forces for the rupee include month-end dollar demand from companies and the Reserve Bank of India’s steps to limit runaway gains to support exports and to bring in price stability,” J Moses Harding, executive vice-president at IndusInd Bank, wrote in a research note on Thursday.

The rupee declined 0.2% to 45.66 per dollar at the close of trade on Thursday. That curbed the currency’s gains this month to 3.1%, still the best performance among Asian currencies after South Korea’s won. The rupee touched 45.44 on Wednesday, the strongest level since May 14.

Offshore forwards indicated the rupee will trade at 46.25 to the dollar in three months, compared with expectations of 46.10 on Wednesday. The government on Thursday raised the limits on overseas investments in government bonds and corporate debt by $5 billion each.

Source : economictimes.indiatimes.com