MUMBAI: The Indian rupee ended weaker on Monday, dragged down by weak local shares, but it crawled back from the day's trough aided by gains in the euro.
The common European unit rose to a four-month high on Monday, pushing above the key $1.40 level on reported buying by Middle East accounts and expectations of higher interest rates as the market shrugged off a ratings cut on Greece.
The partially convertible rupee ended at 45.04/05 per dollar, 0.1 percent weaker than its closing of 44.98/99 on Friday.
During the day, the local unit had moved in a 45.0325-45.1750 range.
Indian shares dropped 1.4 percent on Monday, with rate sensitive sectors contributing the most to the losses, hit by political worries on the domestic front and surging crude oil prices.
A key southern ally of the ruling coalition plans to formally quit its ministerial posts over a local election row, a move that will make it more difficult for Prime Minister Manmohan Singh to push through his agenda, including economic reforms.
The Congress-led coalition government is not in danger of collapse though because the Dravinda Munnetra Kazhagam (DMK) party has said it will offer the coalition conditional support after its two cabinet level ministers and four junior ministers quit.
Traders said as of now, political instability was not a big worry for the local currency market, but a prolonged crisis, might impact foreign investor sentiment about India.
Foreign funds have pulled out around $2 billion from Indian equities from the start of the year to March 3. High global crude oil prices also pressured the local unit, dealers said.
Brent crude rose to $117 a barrel and US oil hit the highest since September 2008 on Monday as fighting in Libya disrupted its supplies and renewed concern of wider disruptions in the Middle East. Oil is India's biggest import and domestic oil refiners are the largest buyers of dollars in the local currency market.
One-month onshore forward premiums the three month premiums were at 76.50 points and the one-year at 275.00 points.
One-month offshore non-deliverable forward contracts were quoted at 45.3, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts closed at 45.2300 on the National Stock Exchange and the MCX-SX, while they ended at 45.2375 on the United Stock Exchange, with the total traded volume at $7.3 billion.
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