Oil Refiners Demand for Oil Sends Rupee to a Two Week Low

The Indian rupee was at its lowest in two weeks on Monday, as dollar demand from oil refiners and importers weighed, but state-run banks were expected to step in to prevent further falls.

At 10:15 a.m. (0445 GMT), the partially convertible rupee was at 46.9075/9100 per dollar, off an early low of 46.95, its lowest since Sept. 16, and 0.8 percent weaker than 46.545/555 at close on Friday.

"The rupee opened with a gap on month-end dollar demand from importers and even oil refiners are buying. The dollar is also stronger against other currencies like the euro, which is also hurting," said Naveen Raghuvanshi, an associate vice president with Development Credit Bank.

"The state-run banks may be there to protect the rupee but they are not yet in, so we may see a band of 46.75 to 46.95 today. In case they don't step in then 47 is an easy target," he added.

Oil firms, the biggest buyers of dollars in the domestic market, usually make their payments toward the close of each month. India imports about 70 percent of its oil, which was trading below $106 a barrel.

The euro and sterling retreated on Monday on growing concerns about the financial system as the toll from the credit crisis spread to Europe.

Traders said they would also be watching the stock market to gauge cues on fund flows. India's main share index shed more than 1 percent in early trade, after opening marginally positive.

Foreigners have sold a net $9.3 billion of Indian shares so far in 2008, after buying a record $17.4 billion last year.

Author: Jo Amey