Indian rupee decline due to global factors-cbank 

Shillong, May 8: The weakening of India's rupee against the dollar is due to global uncertainties, which the central bank flagged in its policy review last month, Reserve Bank of India Governor Y.V. Reddy said on Thursday. 

The rupee hovered near a one-year low struck on Thursday, as record oil prices drove up dollar demand from refiners and other importers and fund inflows into a tepid stock market slowed. 

At 0855 GMT, the rupee was trading at 41.635/645 per dollar, marginally stronger than 41.72 hit in morning trade, which was its lowest since April 23, 2007. 

"The rupee is reflecting the uncertainties which have been indicated and analysed in the policy statement," Reddy told reporters on the sidelines of a central bank board meeting in Shillong. 

The currency's fall has raised concerns of a widening trade deficit. The rupee ended at 41.36/37 on Wednesday. 

"The trade deficit may marginally deteriorate from consensus estimates and the current account deficit may also marginally deteriorate this year, but this will be comfortably financed by capital inflows," Reddy said. 

"The current account deficit will be in the range of what the central bank wants." 

Firm oil prices <CLc1> and robust domestic demand boosted India's imports by 27 percent to $235.91 billion in 2007/08, and widened the trade deficit <INTRD=ECI> for the fiscal year by 35.5 percent to $80.4 billion, from $59.32 billion the year before. 

Crude oil, India's biggest import, traded above $123 a barrel, close to its record high hit on Wednesday. India imports 70 percent of its oil needs, and crude refiners are among the biggest Indian buyers of dollars. 

Traders said weakness in regional stock markets had increased worries of a slowdown in capital inflows. 

Foreign capital is a key driver of the rupee. Foreigners are net sellers of equities worth $2.9 billion in 2008, after buying more than $17.4 billion in the previous year.