Re dips as importers settle payments

Rupee dropped to the lowest in more than two weeks on speculation companies bought more dollars to settle overseas payments on the view the local currency may be set to end a five-month rally.

The rupee has advanced 4.3 per cent since July as overseas funds lifted purchases of the nation's shares.

Firms such as IndianOil , the nation's largest refiner, may step up dollar purchases on speculation oil prices won't fall any further after their 10 per cent decline in the past month. The rupee fell alongside 10 of 15 most actively-traded Asia-Pacific currencies against the dollar.

"There has been some genuine dollar demand from importers,'' said Harish Menon, economist at ING Vysya Bank Ltd in Mumbai. "The rupee has also been affected by the dollar's strength against other currencies.''

The rupee fell 0.4 per cent to 44.56 against the dollar as of the 5 pm close in Mumbai, according to data compiled by Bloomberg. That's the lowest since December 22. It may decline to 44.7 in the near term, Menon said.

Crude oil was near an 18-month low at $55.21 a barrel on speculation mild weather in the US Northeast and rising fuel stockpiles will curb demand.

The Organization of Petroleum Exporting Countries, which supplies 40 per cent of the world's crude oil, will start a 500,000-barrel-a-day cut in output a month earlier than planned, to stop a decline in oil prices, Qatari Oil Minister Abdulla bin Hamad al-Attiyah said yesterday.

The rupee pared losses on speculation overseas investors will buy more local equities to benefit from the nation's economic growth and as local banks raise funds from abroad.

Global funds: "The broad sentiment is still in favor of the rupee because the economic outlook will keep attracting flows,'' said V Venugopal, a currency trader at state-owned Andhra Bank in Mumbai. " I expect that in the near term, dollar supply in the currency market will be more than demand.''

The rupee may rise to 44.35 in the next week, he said. Overseas fund managers bought an average $181 million of local shares a day this month, according to figures from the Securities and Exchange Board of India up to January 8, compared with average daily sales of $40 million in December.

Finance Minister Chidambaram yesterday said the economy will expand around 9 per cent in the financial year ending March 31, above the central bank's previous estimate of around 8 per cent. Growth has averaged more than 8 per cent in the past three financial years, the highest since independence in 1947.

ICICI Bank Ltd, India's largest lender by market value, yesterday said it sold $2 billion of dollar-denominated bonds, the most raised overseas by an Indian company, to meet demand for loans as the nation's middle class grows.