Apprehensions of higher trade deficit on account of spiralling crude oil prices and its impact in the inflation led to a bearish sentiment on the spot rupee, which breached 41 to a dollar and hit a new eight and half month low of 41.35/36 to a dollar.It could be mentioned that the inflation is already ruling at 42 month high of 7.57 per cent and oil forms a bulk portion of the import bill for India. According to dealers, the spot rupee opened a tad lower than the closing of 40.94/95 to a dollar on Tuesday and in no time breached 41.00."Incidentally, the rupee reached an intra-day low of 41.41 primarily triggered by aggressive buying by oil companies, primarily Bharat Petroleum and Hindusthan Petroleum," said dealers. The crude oil prices reached $122 per barrel following supply disruptions in major oil producing nations like Iraq and Nigeria.However, most of the buying by the oil companies are in the spot market or in the near term forwards . These oil companies were booking dollars in future for a maximum period of one month.Besides, foreign banks continued to buy dollars on behalf of their custodian (foreign institutional investors) clients who were not only booking profit in the equity market but also repatriating funds resulting in an outflow, said dealers. The bearish outlook on rupee in the Indian markets led to arbitrage opportunities in the NDF market.Non deliverable forward (NDF) market is a derivative market where foreign investors take a position on the rupee dollar exchange rate in the overseas market. Currently the view on rupee is bearish, which may lead to notional purchase of dollars to be invested overseas. The equity market closed flat and there were no fresh inflows into the market as well. All these factors put together pulled down the spot rupee to a low of 41.41 after which it recovered to close at 41.35/36 to a dollar.According to dealers, most of the exporters would have eagerly sold dollars at these levels (41.41) but most of them have booked long-term contracts on Tuesday when the rupee first touched eight month low of 40.94/95 to a dollar.Lack of selling by exporters was also one of he reasons for the rupee premia paid for booking forward dollars to go up. The annualised premia or six month and one year forward dollars closed at 1.75 per cent and 1.51 per cent as against 1.6 per cent and 1.43 per cent respectively on Wednesday.
