MUMBAI: The Indian rupee fell to its lowest in more than two weeks on Tuesday as worries about the economic impact of Japan's earthquake on growth and demand dragged local shares, with weak Asian currencies also weighing.
At 11:30 a.m., (GMT 0500), the partially convertible rupee was at 45.2700/45.2750 per dollar, after falling to 45.38, its weakest since Feb. 25. It had ended at 45.06/07 per dollar on Monday.
The 30-share benchmark BSE index shed 1.3 percent on Tuesday, with financials leading the decline, as Asian markets tumbled on escalating crisis at quake-stricken Japan.
"I think it is largely going in line with a risk aversion sentiment, particularly this morning. It wasn't there so much yesterday…markets outside Japan tended to discount this as a more local event for Japan," said Ajay Mahajan, managing director and head of financial markets and institutional banking at UBS.
"The risk aversion is likely to stay for a while until the situation in Japan completely clarifies itself one way or the other."
The rupee is likely to weaken further in the short-term, dealers said.
"Given (that) the interest rate differential is hugely in favour of the rupee, one does not expect the rupee to fly off the handle at all…I would expect the rupee to trade between 45.25-45.75, with an upside risk to 46.25 in the short-term," Mahajan said.
The index of the dollar against six major currencies was up 0.46 percent at 76.703 points from 76.518 points, when the local market closed on Monday.
Most Asian currencies were weaker against the dollar on Tuesday.
The one-month onshore forward premium was at 29.75 points, lower than Monday's close of 30.75 points, while the three-month premium fell to 80.25 points from 81.25 points.
The one-year premium was lower at 279.50 points compared with 280.00 points on Monday.
The one-month offshore non-deliverable forward contracts were quoted at 45.50, weaker than the onshore spot rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange were at all 45.4000, with the total traded volume at about $1.98 billion.
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