Rupee weakens most in 7 weeks

The rupee fell the most in seven weeks on concern a surge in oil prices will boost import costs and widen the current-account deficit from a record.

Crude on the New York Mercantile Exchange touched $103.41 per barrel on Thursday, the highest level since September 2008, amid concern Libya's political crisis will disrupt supplies of the commodity from the Middle East. India imports almost 75% of the fuel it uses. The rupee also dropped on speculation losses in the stock market will prompt overseas investors to pull money out of local assets.

"The rupee is being dragged down by oil prices and the weakness in stocks," said Krishnamurthy Harihar, treasurer at FirstRand in Mumbai. "If oil persists at these levels, the current account is going to deteriorate."

The rupee weakened 0.8% to 45.4775 per dollar as of the 5 pm close in Mumbai, according to data compiled by Bloomberg. That is the biggest decline since January 5.

The shortfall in India's current account, the broadest measure of trade and investment, increased to $15.8 billion in the quarter ended September 30, according to the latest government data.

The Bombay Stock Exchange's Sensitive Index tumbled 3% on Thursday, the most in 15 months. Overseas funds have withdrawn $1.6 billion from Indian equities this year, according to Sebi.

Offshore forwards indicate the rupee will trade at 46.32 to the dollar in three months, compared with expectations of 45.92 on Wednesday.

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