Indian rupee slides to two-year low against dollar

MUMBAI: India's rupee slid to a two-year low against the dollar on Tuesday as worries over the deepening European debt crisis boosted the US currency's appeal.

The partially convertible Indian currency weakened to 48.23 rupees to the dollar on increasing demand for the greenback from banks and importers.

"People are moving away from (perceived) riskier currencies towards safer options like the dollar and gold" as risk appetite wanes, said Siddhartha Sanyal, chief India economist at Barclays Capital.

The rupee has shed six percent in the past four weeks.

The currency's latest lurch downwards came after global ratings agency Standard & Poor's downgraded Italy's sovereign debt rating on Monday, citing political and economic risks.

Weak Indian equity markets -- which have slid near 18 percent so far in 2011 -- have also put pressure on the rupee as overseas funds sell Indian stocks.

The rupee's fall will fuel India's inflationary woes, making imported goods such as foreign crude oil, on which the country is reliant, more costly. Inflation in India is running at close to 10 percent.

The Indian currency last touched the 48 rupee level in late September 2009, according to the domestic central bank's web site.

The rupee recovered marginally to 48.09 later on Tuesday as the domestic share market rallied.

Unlike fellow emerging market giant China, India allows its currency to float freely. The Reserve Bank of India does not target any particular currency rate and intervenes in the foreign exchange market only to curb volatility.

The Indian currency's record low against the US unit was 52 rupees to the dollar, hit in March 2009.

Copyright AFP (Agence France-Presse), 2011