The Hindu Business Line : Re plunges on dollar demand from oil cos

The domestic currency opened lower at 40.65 and touched an intra-day low of 40.98/99. It ended the day at 40.96, about 35 paise lower than the earlier close of 40.61/62.

Currency traders said apart from oil companies, corporates looking to remit dollars overseas for their acquisitions also bought dollars.

CRUDE SOARS

International oil price touched a record high of $121 a barrel on Tuesday. Oil price zoomed on threats to supply in Nigeria and Iraq and growing global fuel consumption.

“There seems to be corporate demand for dollars possibly for remittances abroad. The remittances may be for completing acquisitions overseas,” said Mr Paresh Nayar, Chief Dealer, Development Credit Bank.

Dealers said that companies such as Tata and Bharti Telecom would be requiring dollars for their overseas acquisitions.

According to the chief forex dealer of a private bank, most oil companies stock up on oil supplies before the monsoon, to avoid the difficulties they could face in transportation. Therefore, the rupee typically weakens in the first quarter of the fiscal.

“In terms of dollar supply, FII inflows have been flat and exporters have already sold in the market. The next target for the rupee could be 41.25 to 41.5 and it could end the year at 42 mainly on account of India’s high current account deficit,” said Mr Sundeep Bhandari, Managing Director and Head-Global markets, India and South Asia, Standard Chartered Bank.

In the forward premia market, the 6 month eased to 1.63 per cent (1.74) and the 12 month ended at 1.44 per cent (1.54 per cent).

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