OREANDA-NEWS. March 11, 2011. India’s rupee fell the most in two weeks on speculation crude oil prices near a 29-month high will increase import costs and widen a record current-account deficit. Oil in New York surged more than 20 percent in the past month on concern escalating political violence in Libya, Africa’s third-largest producer, will disrupt supplies. Monthly shipments of the commodity to the South Asian nation averaged USD 8 billion in the year to Jan. 31, up from USD 6.5 billion in the previous 12 months, according to the latest government data.

“Oil prices are something to be watchful of,” said Krishnamurthy Harihar, Mumbai-based treasurer at FirstRand Ltd. “The problem in Libya itself doesn’t matter, but the concern is that it has the potential to spread across the Middle East. It will have an impact on India’s trade” and the rupee, he said.

The currency dropped 0.4 percent to 45.1825 per dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg, extending its loss this year to 1.1 percent. That’s the biggest decline since Feb. 24.

India’s current-account shortfall increased to USD 15.8 billion in the quarter ended Sept. 30, according to latest figures from the central bank. The nation buys from overseas almost three-quarters of the oil it uses. Crude reached the high of USD 106.95 on March 7.

The rupee also declined as the Bombay Stock Exchange’s Sensitive Index lost 0.8 percent. Overseas investors pulled USD 1.8 billion from the nation’s equities this year through Feb. 23, after pumping a record USD 29.3 billion into the securities last year, according to the Securities & Exchange Board of India.

Offshore forwards indicate the rupee will trade at 45.98 in three months, compared with expectations for a rate of 45.76 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.