The Indian rupee dropped to a three-week low on Friday while also posting its biggest weekly fall in two months as a sharp sell-off in the euro and broad rally in the greenback hurt amid the absence of any fresh domestic triggers. The rupee which has been relatively stable over the last couple of months after having seen as much as 20 percent fall to a record low in late August has been boosted mainly by robust foreign fund inflows into the stock market.
Foreign funds have bought $16.5 billion worth of shares so far this year. "The huge fall in the euro and a rally in the dollar index have pushed the rupee down today, but 62 is a psychological level which will be a key," said Paresh Nayar, head of foreign exchange and debt trading at First Bank. "The 61.20 support should hold for next week as well, but the overall range could be wider," he added. The partially convertible rupee closed at 61.74/75 per dollar compared with 61.50/51 on Thursday. Financial markets will remain closed on Monday for a local holiday. On the week, the rupee fell 0.5 percent, its biggest weekly fall since the last week of August. In the offshore non-deliverable forwards, the one-month contract was at 61.36, while the three-month was at 63.38.