Rupee takes a tumble as importers step up dollar buy

India’s rupee declined this week by the most in two months on speculation that importers were buying dollars to meet month-end oil payments and to take advantage of a slump in gold prices.

India, Asia’s third-largest economy, meets about three-quarters of its oil needs from abroad. Demand for gold typically increases ahead of Diwali that starts early in November. The purchase of gold in the festival season is considered auspicious by many Indians.

“Oil companies were buying dollars at every level since yesterday (Thursday),” said Paresh Nayar, the Mumbai-based head of currency and money markets at FirstRand.

“There could be buying related to gold because prices have come down.” The rupee fell 1.1% this week to 44.59 per dollar as of the 5 pm close in Mumbai, the biggest weekly drop since August 13, according to data compiled by Bloomberg. It reached 44.605 on Monday, the weakest level since October 12. Offshore forwards indicate that the rupee will trade at 45.21 to the dollar in three months, compared with expectations of 44.97 on Thursday.

Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.