MUMBAI, Sept 1: The Indian rupee closed at its lowest level against the dollar in nearly 1-years on Monday as importers stepped up dollar purchases and as a record monthly trade deficit weakened sentiment.

The trade deficit in July was $10.8 billion, widening from $9.8 billion in June. For April-July, the first four months of the fiscal year, the deficit widened to $41.23 billion between April-July from $27.35 billion a year earlier.

The partially convertible rupee closed at 44.17/18 per dollar on Monday, its lowest close since mid-March 2007 and 0.5 per cent lower than Friday’s close of 43.935/945. It fell to as low as 44.23 in early deals.

The rupee has fallen 10.8 per cent so far in 2008 to be one of the weakest Asian currencies against the dollar. It rose more than 12 per cent in 2007.

Importers have been buying heavily today and only central bank intervention has checked the fall, said V. Rajagopal, head of currency trading at Kotak Mahindra Bank, who expects the rupee to fall to 44.50 in the near term.

Two dealers at other banks said the central bank sold around $800 million in the spot market to lift the rupee off its low, and also sold dollars in the forward market.

A Reuters poll on Monday showed investors have increased their short bets on the South Korean won, Malaysian ringgit and Indian rupee, selling those currencies against the dollar in expectation they will weaken further.

Volumes in the currency futures market on Monday fell to nearly a third of Friday’s debut levels, with around 24,000 contracts traded on the National Stock Exchange.

The one-year contract closed at 45.50, and the one-month contract was the most heavily dealt.

One-month offshore non-deliverable forward contracts was quoting at 44.23/44.33, weaker than the onshore rate.

Richard Yetsenga, FX strategist at HSBC said India’s current account deficit and unfavourable global conditions were likely to see the rupee weaken modestly from current levels.

—Reuters