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MUMBAI (Reuters) – The rupee fell 1 percent to its lowest in more than two years on Tuesday on capital outflow concerns following an upheaval on Wall Street, but dealers said state banks were selling dollars to halt the slide.
At 10:45 a.m., the partially convertible rupee was at 46.54/55 per dollar, more than 1 percent weaker from 46.05/06 at close on Monday. It dropped to 46.5775 in early trade, its weakest since Aug. 25, 2006.
At its low the rupee had shed 5.64 percent in September, taking losses so far in 2008 to 15.4 percent.
"Globally the scenario is quite gloomy which is driving the rupee currently," said Naveen Raghuvanshi, an associate vice president at Development Credit Bank.
"Even the lower oil prices are not helping much. There is some dollar demand from oil companies and foreign banks. The rupee looks likely to test 47 this week," he said.
Dealers said arbitrage between the onshore and offshore markets was also pushing the rupee down.
One-month offshore non-deliverable forward contracts were quoting at 46.89/99, weaker than the onshore rate.
Indian stocks were down more than 2 percent in early trade after a 3.35 percent drop on Monday, tracking shaky global markets.
Traders said state banks sold dollars sporadically in suspected intervention by the Reserve Bank of India, but the rupee continued to trade with a downward bias.
Oil, tumbled more than $4 to a seven-month low on Tuesday, in free fall for a second day as Lehman Brothers' collapse made investors ditch oil for safe-haven assets, and on fears the credit crisis will hurt the real economy.
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