India Rupee Drops as Costlier Oil Seen Boosting Import Bill

India’s rupee weakened for a second day on concern costlier oil will boost the nation’s import bill, offsetting any benefit from a drop in gold shipments.

Brent crude rose to a three-month high before a meeting of the Organization of Petroleum Exporting Countries in Vienna today. Indian refiners, the nation’s biggest purchasers of foreign exchange, are fulfilling all of their dollar needs from the local market after the central bank stopped direct supplies last week, the Reserve Bank of India said in a Dec. 2 statement.

“Higher oil prices are a concern,” said Vikas Babu, a currency trader at Andhra Bank in Mumbai. “Inflows are expected but we also expect bids for dollars from oil importers.”

The rupee dropped 0.2 percent to 62.4950 per dollar as of 10:02 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 12.21 percent.

India’s July-September current-account deficit shrank to the narrowest since at least 2010 as gold imports cooled, according to RBI data published Dec. 2. India, the world’s biggest consumer of the metal, raised taxes on bullion imports three times this year to pare a trade imbalance that helped push the rupee to a record low of 68.8450 per dollar on Aug. 28. The nation also ships in about 80 percent of its oil.

OPEC, the 12-member group which pumps about 40 percent of the world’s crude, is forecast to keep its production quota unchanged at today’s meeting. Investors also await U.S. jobs and new home sales data today that may provide clues as to when the Federal Reserve will pare monetary stimulus that has boosted inflows into emerging markets.

Three-month offshore non-deliverable rupee forwards weakened 0.3 percent to 63.96 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.