Beating expectations, the Indian rupee on Tuesday tumbled by 34 paise to eight-month low at 40.94/95 against the greenback on as global crude prices hit a new record high, sending oil companies to rush for US currency amidst its short supply.
In brisk trade at the Interbank Foreign Exchange market, the local currency resumed weak at 40.67/68 a dollar from its last close of 40.60/61 a dollar and gradually moved downwards to near 41-level during the day.
The rupee had seen this level last on September 4, 2007 when it closed at 40.9750/9850.
The rupee premiums on forward dollar ended further lower on sustained receivings by exporters.
The benchmark six-month forward dollar premiums payable in October ended at 31-1/2 - 33-1/2 paise, down from 33-35 paise on Monday and the far-forward maturing in April eased to 57-59 paise from 60-1/2 - 62-1/2 paise previously.Demand for dollar by banks
Forex dealers said US dollar commanded sustained demand from banks and corporates. The sky-high oil prices caused fears of a widening trade deficit, exerting pressure on state-owned oil companies as well as a slowdown in portfolio inflows, they added.
The rupee has weakened to near 41-level belying all market expectations. Barely a week back, the market was abuzz with speculations that rupee may gain in view of tight supply after the Reserve Bank hiked the CRR to 8.25 per cent, which is expected to drain the system by nearly Rs 27,000 crore in the liquidity system.FII inflows
Dealers said there was consistent dollar buying from oil companies amid fears that the Indian unit might weaken further due to the widening deficit and continued slowdown in FII inflows, key driver of the local currency.
The capital inflows had driven the rupee by a whopping 12 per cent during last year but there was outflows in the initial four months of the calendar year.
Meanwhile, the world oil prices reached a new record at $120.30 a barrel in Asian trade on Tuesday.
Weakness in local equity markets also weighed on the rupee sentiment. Indian benchmark Sensex fell further by 118 points or 0.67 per cent.
Foreign banks too covered short positions in dollar, adversely affecting the rupee sentiment, traders said.
The Reserve Bank of India fixed the reference rate for US dollar at Rs 40.69 and that for single European unit at Rs 63.08.Cross currency trade
In cross-currency trades, the rupee also weakened against the British Sterling, the euro and the Japanese yen.
The rupee fell back against the Pound sterling to end the day at Rs 80.64/66 per pound from its overnight close of Rs 79.82/84 per pound and also dropped against the single European currency at Rs 63.53/55 per euro from its last close of 62.74/76 per euro.
The Indian unit dipped sharply against the Japanese yen to close the day at Rs 39.12/14 per 100 yen from its previous close of Rs 38.59/61 per 100 yen.