The Indian rupee dropped to fresh near two-year lows on Tuesday, weighed down by the dollar's broad strength against a basket of currencies, but central bank intervention checked a sharper decline. The partially convertible rupee ended at 44.84/85 per dollar, half a percent weaker than Monday's close of 44.60/61 but a shade stronger than an intraday low of 44.93, a level it last tested in late November 2006.
At its low, the rupee had fallen 0.62 percent this week, taking losses in September to 2.2 percent. It is down 12.3 percent in 2008 after gaining more than 12 percent last year. "The trend is now for a weaker rupee on worries about the current account and the dollar's rebound, and we may see 45.50 tested in the near-term," said Agam Gupta, head of trading at Standard Chartered Bank in Mumbai.
The stock market ended 0.3 percent down on Tuesday and has fallen 26 percent so far this year as foreigners pulled more than $7.3 billion out of shares amid a global financial crisis. They bought a record $17.4 billion in 2007. Comments from new central bank governor D. Subbarao that the central bank's foreign exchange policy had served it well and there was no need to change it did not ruffle financial markets.
One-month offshore non-deliverable forward contracts were quoting at 45.03/13, weaker than the onshore spot rate. In the currency futures market, more than 54,000 contracts changed hands and the front-month contract was the most heavily traded. It closed at 44.88 per dollar.
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