Indian Rupee Declines to 17-Month Low

India's rupee closed at the weakest level in 17 months on speculation importers bought dollars to settle bills.

The rupee fell by the most in a week as refiners including Indian Oil Corp., the country's biggest, took advantage of a two-day rally to buy dollars at a cheaper rate. Demand for the U.S. currency typically increases at the end of every month when import payments are due. Capital inflows slowed as global funds sold local stocks, further weakening the currency.

The rupee declined 0.8 percent to 43.785 against the dollar at the 5 p.m. close in Mumbai, the lowest level since March 19, 2007, according to data compiled by Bloomberg.

India's average oil import costs increased to $8 billion a month this year, from $5.5 billion in 2007, trade ministry data show, as the price of the commodity surged 60 percent in the past year.

Overseas investors sold $7.2 billion more local shares than they bought this year, according to data provided by the Securities & Exchange Board of India. They were net sellers on all but four of the 14 trading days this month.

A record $17.2 billion in net purchases in 2007 helped the rupee complete its best year in more than three decades.

The benchmark stock index slumped 29 percent this year, making the rupee the fourth-worst performer among Asia's 10 most-active currencies outside Japan.

Indian Rupee Declines to 17-Month Low, Bloomberg
8/25/2008 9:01:34 AM