Rupee falls to 41.16, bonds down

Written by Agencies | Aug 30 | Updated: Aug 31 2007, 05:46am hrs
Indias rupee fell on speculation some importers bought dollars to pay for shipments. The rupee reversed an earlier advance as demand for dollars typically increases at the end of every month from refiners who need to settle their month-end import bills. India imports three-quarters of its energy needs. The price of crude oil has risen 15.9%over the past three months.

We have seen some demand for dollars from companies including refiners, said V Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd in Mumbai.

The currency fell 0.1% to 41.1675 against the dollar at the 5 pm close of trading in Mumbai, according to data compiled by Bloomberg. It may trade between 40.95 and 41.35 in coming days, Rajagopal said. The rupee, the best performer in Asia this year, earlier rose on speculation five days of gains in the benchmark stock index is attracting overseas investors to local shares.

Net stock purchases by overseas investors reached a record $5.9 billion last month. Accelerating growth is prompting funds and companies to seek higher returns by investing in Asias fourth-biggest economy. The currency market is closely watching swings in stocks, said Paresh Nayar, chief currency trader at Development Credit Bank Ltd based in Mumbai. India, seen as a safer bet than many other countries, will keep attracting money from overseas.

The economy probably grew 9% in the three months to June 30 from a year earlier, compared with 9.1% in the previous quarter, according to the median estimate of 18 analysts surveyed by Bloomberg News.

Bonds fell, paring earlier gains, on concern losses related to the US subprime credit market will spur investors to take money out of emerging markets. Ten-year notes declined for a third day after Australias Basis Capital Fund Management Ltd on Wednesday sought bankruptcy protection for its second-biggest hedge fund, stoking concern the subprime mortgage crisis will keep spreading. There is still some short-term uncertainty in bonds due to the volatility in overseas capital markets following the subprime crisis, said RVS Sridhar, vice-president of treasury at Axis Bank Ltd in Mumbai.