Rupee Hits 2-year Lows as Stocks Fall Weighs

MUMBAI: The rupee fell past 46 per dollar for the first time in two years on Monday, knocked down by losses in stocks on worries about global financial sector problems and heavy dollar demand from importers. Dealers said the central bank was seen intervening in the market, selling dollars through state-run banks to halt the rupee's sharp fall, but it did not provide much respite as the quantum of intervention was not too large.

The partially convertible rupee ended at 46.05/06 per dollar, off a low of 46.08, its weakest since Sept. 20, 2006. It was 0.65 percent weaker than Friday's close of 45.75/76. "The rupee fell tracking the share market. But there is a general bearishness among market participants as there are no dollar inflows at the moment and they cannot see, when and how that will improve," a senior dealer with a private bank said. One-month offshore non-deliverable forward contracts were quoting at 46.32/42, 0.6 percent weaker than the onshore spot rate, indicating a bearish near-term outlook.

Indian shares fell 3.35 percent on Monday to their lowest close in two months as jittery investors braced for more foreign withdrawals after Lehman Brothers filed for bankruptcy protection.

Foreign funds have sold a net $8.2 billion of shares this year, removing a crucial support for the rupee, which has fallen 14.4 percent against the dollar this year. Last year record net foreign inflows of $17.4 billion into stocks had helped the rupee rise more than 12 percent.

Analysts expect the rupee to remain under pressure as capital inflows have reduced substantially, and higher dollar demand from oil companies and importers is also weighing. Oil, India's biggest import fell to seven-month lows below $95 per barrel on Monday, more than $50 below July's record high. Lower oil prices are attracting refiners, who are seeking dollars to pay for their shipments, dealers said.