Rupee skids on high oil, hits 13-month low

By Anurag Joshi

MUMBAI (Reuters) - The rupee dropped to its lowest in 13 months on Wednesday as record oil prices pushed up dollar demand from refiners, but exporters then cashed in their holdings and helped the Indian unit to pull back.

The partially convertible rupee ended down 0.8 percent at 42.45/46 per dollar, off an intraday low of 42.67, the weakest since April 13, 2007, according to Reuters data. It had closed at 42.10/11 on Tuesday.

The rupee has lost 2 percent this week, taking losses to about 7 percent this year. In comparison, the Pakistani rupee has depreciated more than 11 percent this year.

"Oil demand was through the day. We see it continuing this week," the forex trading head of a foreign bank said, adding he expected the rupee to touch 43 in the coming days.

Oil, India's biggest import, traded above $125 a barrel, after touching a record near $127 on Tuesday. High global oil prices raise the risk of widening India's trade deficit and putting downward pressure on the rupee.

Traders said they would watch portfolio flows after export-focused software services companies led a rally on the stock market, propelling the main BSE index up 1.35 percent on Wednesday.

Foreign funds have been net sellers of nearly $3 billion of stocks this year, with the benchmark index down 16.3 percent since the close of 2007.