The rupee weakened on Tuesday following losses in other Asian currencies and a downgrade in India's investment grade outlook by rating agency Standard and Poor's. "The rupee weakened pretty fast after the S&P outlook cut was announced. It should have a negative impact in the short term and may force the Reserve Bank of India to cut rates to boost growth in the economy," the chief dealer with a state-run bank said.
The partially convertible rupee closed at 49.87/88 per dollar, off a high of 49.79 and 0.3 percent weaker than its Friday's close of 49.72/74. Markets were closed on Monday for a religious holiday. Dollar sales by exporters and state-run banks and a partial recovery in the stock market also helped limit losses in the rupee. "There was some selling coming in around 49.95 levels from exporters and also from state-run banks," a senior dealer at a foreign bank said.