The Indian rupee fell to its lowest in five months on Tuesday as a state-run bank bought dollars for defence-related payments, causing a shortage of the US unit. The partially convertible rupee ended at 39.91/92 per dollar, its lowest close since September 19, according to Reuters data and 0.35 percent weaker than Monday's close of 39.775/785.
"Today, we've seen a major dollar squeeze from the holiday in the US as well as the state-run bank's purchase of dollars to finance a major defence purchase, which drove the rupee down," said a senior dealer with a private bank.
US markets were closed on Monday for the Presidents Day holiday, causing flows of capital into India's stock market to taper off. Inflows of foreign capital are a key driver for the local unit. "There were a lot of importers selling (the rupee) too," the trader added.