India's Rupee Drops to Two-Year Low as Oil Importers Buy Dollars

  • Central bank unlikely to defend exchange rate: FirstRand
  • Rupee fell 3 percent in January in Asia's worst performance

India’s rupee dropped to the lowest level in more than two years on speculation oil importers stepped up dollar purchases to pay month-end bills.

The rupee fell 0.3 percent to 68.2250 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It declined to 68.2575 earlier, the weakest level since September 2013. Sovereign notes declined.

The Indian currency has weakened over 3 percent this month in Asia’s worst performance as global stock markets plunged and oil fell below $30 a barrel. India’s benchmark equities gauge, which dropped 0.1 percent on Thursday, has lost more than 6 percent this year. There’s a growing chance the central bank will cut lenders’ reserve ratios, Radhika Rao, a Singapore-based economist at DBS Bank Ltd., wrote in a research note on Thursday.

“The month-end demand for dollars continues,” said Paresh Nayar, the Mumbai-based head of currency and money markets at the local unit of South African lender FirstRand Ltd. “Sentiment remains weak after the currency breached the 68 level, indicating the central bank isn’t protecting any level.”

The yield on the government notes due May 2025 rose two basis point to 7.81 percent, according to prices from the Reserve Bank of India’s trading system.

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