Indian rupee weakens past 42/dlr as data weighs

(Updates to close)

By Saikat Chatterjee

MUMBAI, May 12 (Reuters) - The Indian rupee <INR=IN> weakened past 42 per dollar for the first time in more than a year on Monday after data showing factory output grew at its slowest in six years raised concerns about a slowdown in the economy.

The data sparked dollar buying by foreign and private banks, which then triggered stop-loss orders to exit positions based on the dollar weakening that accelerated the rupee's fall.

Support for the currency was already fragile as record oil prices have boosted dollar demand from refiners, and last week's stock market losses had raised concerns about foreigners withdrawing investment funds.

The partially convertible rupee ended at 42.05/06 per dollar, more than 1 percent down from Friday's close of 41.60/61. It has fallen 3.4 percent since May 2 to its lowest since April 2007.

Industrial output grew 3.0 percent in March from a year earlier, well below market forecasts and raising worries about growth at the same time as inflation has risen to 3-½ year highs. See [ID:nBOM216199].

"The numbers have raised some doubts on the overall growth prospects in the coming months, and good dollar demand has seen it triggering some stop-losses," said V. Rajagopal, head of currency trading at Mumbai-based Kotak Mahindra Bank.

The rupee has lost 6.3 percent against the dollar in 2008 to be Asia's weakest currency behind the Korean won <KRW=>. The rupee rose more than 12 percent in 2007.