Refiners' dollar buy pulls Re down

MARKET ROUND-UP

The rupee fell a second day on speculation a decline in crude oil prices prompted refiners to buy dollars.

"Importers, particularly refiners, are covering some dollar positions after the drop in oil prices," said D Sampath Kumar, treasurer at IndusInd Bank in Mumbai. "They are probably buying dollars as there is a view that oil prices will decline only up to a point."

The rupee fell 0.1 per cent to 44.595 against the dollar as of the 5 pm close in Mumbai, according to data compiled by Bloomberg. It may drop to 44.7 in the next few days, Kumar said.

Crude oil fell as much as 2 per cent to $52.94 a barrel in after-hours electronic trading on the New York Mercantile Exchange after a US government report showed demand plunged to its lowest in more than two years. Prices are down 13 per cent this year. India meets three-quarters of its energy needs from abroad.

Losses in the rupee were tempered by speculation exporters will repatriate overseas earnings on concern the currency will extend its 5.1 percent rally against the dollar since July 19, when it fell to a three-year low.

"The sentiment is in favor of the rupee, and keeping that in mind, I would advise exporters to sell dollars now," said Siddhartha Sapru, head of treasury at SBI Commercial & International Bank in Mumbai. The rupee may rise to 44.35 by next week, Sapru said.

A stronger rupee reduces the value of earnings exporters get from their overseas sales when converted into the local currency.

Infosys Technologies, the country's second-biggest software company, today said gains in the rupee lowered its operating margins by 2 percentage points in the quarter through December 31.