The rupee on Tuesday declined the most in a week on dollar demand from corporates and oil marketing companies, even as crude oil prices rose to the highest level in more than three months. After three straight days of gains, the rupee ended the day at 49.48, down 0.75% from Friday’s close of 49.10.

Tuesday’s closing was the lowest since October 25, 2011. The rupee has depreciated about R0.80 in just the past five trading sessions.

According to forex dealers, the drop in the rupee was on the back of demand for dollars for the purpose of oil and defence equipment buying. During the day, the Indian currency had moved in a wide band of 49.11 and 49.5200.

The euro on Tuesday almost flat at $1.377 from Monday’s close, while the dollar index was trading 0.02% lower at 76.948. Parthasarathi Mukherjee, president treasury, Axis Bank, said: ?The rupee is now left to the markets and is largely moving on dollar demand and to some extent sentiments. Further demand for dollars could spur it to 49.75 levels.?

Ashish Parthasarthy, treasurer, HDFC Bank, added: ?Poor flows in the capital account are putting some pressure on the rupee. Given the situation globally, there is some amount of risk aversion and hence, flows are not coming.? He expects the rupee remain in the range of 48.50 and 50.50.

Brent oil prices were trading close to $116 a barrel on Tuesday. Oil prices have gained close to 6% in the past four trading sessions. High crude oil prices put pressure on India’s current account deficit.

As per provisional data, India’s trade deficit in October was seen at $19.6 billion, the highest in four years.

India’s current account deficit could widen to 3% of GDP in the current fiscal year, said commerce secretary, Rahul Khullar on Tuesday.

According to RBI, India?s current account showed a deficit of $14.1 billion for the June quarter, compared with a shortfall of $5.4 billion at the end of the March quarter.

The local currency has been the worst-performer amongst major global currencies this year, falling more than 10%. The underperformance, experts believe, is due to the ballooning current account deficit coupled with poor capital flows. Foreign investors have invested less than $500 million into domestic equities so far in 2011.