The Indian rupee lost ground in a choppy session on Monday as some overseas investors unwound holdings due to growing risk aversion on concerns about the outlook for global equity and credit markets, dealers said.
Dealers said dollar demand from oil refiners to meet month-end requirements and an unwinding of short-dollar positions ahead of the Reserve Bank of India's policy review on Tuesday put further pressure on the local unit.
The partially convertible rupee ended at 40.53/54 per dollar, off a low of 40.62 hit in early trade but weaker than Friday's close of 40.51/53. It hit a nine-year high of 40.20 last week. "The rupee yo-yoed with the stock market's fortunes today," said a dealer with a private bank.
The rupee's losses were limited by exporters, who offloaded dollars when the rupee was falling towards its intraday low, dealers said. India's benchmark stock index ended up 0.17 percent on Monday, though the market remained concerned that the sell-off in global markets was not over. The index fell 3.4 percent on Friday, its biggest decline in almost four months.
Concerns that a crisis in the US subprime mortgage market is turning into a broader credit crunch continued to weigh on markets across the globe, adding to investor caution, dealers said.
Big foreign inflows into local shares have been a key support for the rupee. Foreigners have bought nearly $10.5 billion worth of shares so far in 2007, just below a record $10.7 billion in 2005 and much higher than nearly $8 billion in 2006.
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