Rupee remains weak as stocks fall again

By Swati Bhat

MUMBAI (Reuters) - The rupee bounced off a two-month low as the dollar fell against major currencies on Monday, but it still ended weaker as losses in the sharemarket renewed worries about foreigners pulling out funds.

The partially convertible rupee closed at 49.08/09 per dollar, off an early low of 49.47 which was its weakest since May 15 but about 0.1 percent below Friday's close of 49.01/02.

"It was mainly tracking the stock market today. The large fiscal deficit announced at the budget and the reddish stock market have been playing havoc with the rupee," said V. Kumar, chief dealer with State Bank of Travancore.

The rupee dropped 2.4 percent last week, its biggest weekly drop since early March, when it had shed 2.8 percent.

Shares fell 0.8 percent to their lowest close in two months as worries about the health of the world economy and uncertainty over corporate earnings reduced risk appetite.

Foreign funds were net sellers of almost $200 million worth of shares on Thursday and Friday, but are still net buyers of about $5.8 billion so far in 2009.

Dealers said progress of the monsoon, important to demand in the domestic economy, would be closely monitored after a weak start in June.

"The rupee is likely to go downwards for some more time with 50.50 to 51.00 levels seeing some intervention as they are psychological levels," Kumar said.