Rupee weakens to nearly two-year low

The rupee fell to the lowest in almost two years against the dollar after the US currency rose to the highest in a year versus the euro amid worsening outlook for some key European economies. The rupee slid in tandem with other Asian currencies outside Japan on concerns that widening credit-market losses will hit global economic growth. Continued selling of Indian stocks by overseas investors coupled with nagging concerns over widening current account deficit too hurt sentiment towards the partially convertible local currency. Persistent dollar demand from corporates, especially oil refining companies, as well as offshore-related dollar demand among foreign banks also put pressure on the rupee through the week. The rupee lost 2.4% during the week to close at 45.75 per dollar, off a low of 45.80, its weakest since Oct. 11, 2006. It has shed nearly 4% in September, taking its losses in 2008 to 13.85%. It had gained 12.2% last year, the most in more than three decades. The currency touched almost a decade high of 39.1850 per dollar on November 7, 2007, as overseas investors bought a net US$17bn of Indian stocks.