Re at 7-month low of above 40 a dollar

A strong demand for dollars from importers and a lack of fresh inflow into the market led the spot rupee to breach the crucial barrier of 40.00 and close at a seven-month low of 40.21/22 to a dollar.

According to dealers, the market has been witnessing a consistent outflow of portfolio investments from the equity market. Portfolio investments are short term in nature and made by FIIs registered with Sebi.

Besides the demand from foreign banks, oil and non-oil importers are rushing to buy dollars to cover their near-term import payments.

"Lack of inflow has brought to the fore the huge current account deficit, which needs to be financed through internal resources in the banking system. Even the corporate inflow cannot be depended upon since the dollar inflow of exporting companies are hit due to a slowdown in the US," said a dealer.

Dealers also pointed out that the rupee depreciation was thus not being accompanied with a sharp surge in prices of the information technology stocks since most of the billing was affected following a slowdown.

Moreover, most of the companies have booked their near-term dollar receivable when the rupee reached 39.65-70 to a dollar.