Rupee falls on importers' dollar rush

The Rupee witnessed the biggest fluctuation of any currency today and fell to its lowest in more than two weeks on speculation importers stepped up dollar purchases to buy commodities, whose prices declined abroad.

Gains in the currency in the past one month together with the fall in crude and gold last week may have prompted local importers to increase shipments from abroad, said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank.

India meets three-quarters of its energy needs from abroad. It is also the world's largest consumer of gold, most of which is met through imports.

"We have seen increased dollar demand for imports of commodities and the supply is not enough,'' Mumbai-based Bhatt said. "Exporters seem to be holding dollar earnings for the time being which has added to the rupee's fall.''

The rupee fell 0.4 per cent to 44.4950 per dollar at the close today, according to data compiled by Bloomberg. That's the lowest since its close on December 22.

Gold dropped 4.9 per cent last week in New York to $606.90 an ounce, the biggest percentage decline since October. Oil fell 7.8 per cent last week in New York, the most in more than 20 months, as mild weather curbed consumption and fuel stockpiles jumped in the US, the world's largest energy user. Crude oil for February delivery was at $56.60 a barrel today.

The country's oil imports increased 31 per cent in the quarter through September 30, the central bank said on December 29.

The local currency may pare losses on optimism fund managers will invest in Asia's fourth-largest economy as it grows at a record pace.

The central bank has forecast the economy will grow as much as 8 per cent in this fiscal year. The rupee may still decline on speculation the central bank will sell the currency to curb rising imports.

"The rupee's stretched valuation makes the case for central bank action to stem further rupee appreciation,'' said Rajeev Malik and Vikas Agarwal, strategists at JPMorgan. Malik is based in Singapore and Agarwal in Mumbai.

"The recent excessively tight domestic liquidity conditions augment the reasons for the central bank to intervene in the currency market.''

The currency has risen 5.3 per cent from a three-year low on July 19.

"We believe the dollar would drift higher against the rupee over the next year,'' Malik and Agarwal said.

The world's biggest movers are based on changes in price yield and are screened for the size of the market and amount of daily trading.