Re falls from two-year high as refiners buy dollar

The rupee retreated from a two year high as refiners bought dollars to buy crude oil after a decline in the price of the commodity.

The rupee declined 0.6% to 44.3650 per dollar at the close of trade on Monday. The currency reached 43.96 on October 15, its strongest level since August 2008. The rupee has climbed 3.3% in the past month.

The rupee fell for the first time in four days amid speculation companies such as Indian Oil were buying oil. India meets about three-quarters of its oil needs from imports. Coal India plans to raise as much as Rs 15,150 crore ($3.4 billion ) in the nation’s biggest-ever initial public offering that opened on Monday.

“Oil companies are buying," said Navin Raghuvanshi, a Mumbai-based currency trader at Development Credit Bank. “The only thing that can prevent the fall is the initial public offering inflows."

The Reserve Bank of India may intervene to weaken the rupee and protect exporters if the currency appreciates past 43 against the dollar, a finance ministry official said.

The government is comfortable with the rupee trading between 43 and 45 to the US currency, the official said late on October 15.

Offshore forwards indicate the rupee will trade at 45 to the dollar in three months, compared with expectations of 44.74 at the end of last week. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

Funds based abroad have pumped $23.2 billion into India’s stocks and $10.3 billion into its bonds so far in 2010.