Rupee posts biggest 1-day fall since Feb '96

MUMBAI (Reuters) - The rupee posted its biggest single-day fall in more than 12 years on Wednesday, hit by rising outflows from the local share market and heavy dollar demand from state-run banks to meet commercial operations.

The partially convertible rupee ended at 49.30/32 per dollar, 2.4 percent weaker than Tuesday's close of 48.1250/1400. On Oct. 27, it fell to a record low of 50.29.

It was the local unit's biggest single-day percentage fall since Feb. 5, 1996, when it dived 2.7 percent.

"A couple of things in the market that hurt: stocks were negative and no (dollar) supplies coming from New York as well. Besides, even the RBI was not seen selling as was expected," said Paresh Nayar, chief dealer at Development Credit Bank.

Foreign exchange trading volumes were light in New York on Tuesday due to the Veterans' Day holiday.

Some other dealers said the central bank did sell dollars via state-run banks to protect the currency, but added the amount was quite small.

"I can't say where the rupee is going now. Overall, this type of volatility and one-way movement hurts all the market players, both the customer and the banker, more so the customer because he can't take a view," Nayar said.

Dealers said the rupee could test 50 per dollar in the next session of Friday if the central bank does not step in to protect the currency. All financial markets are shut on Thursday for a religious holiday.

India's main share index closed down 3.08 percent, at its lowest close in November after bad news from corporate America added to the grim global economic outlook.

Foreign funds continued to repatriate funds, a key factor for the rupee's weakness in recent months. They have so far sold a net $12.7 billion worth of shares after buying a record $17.4 billion last year.

One-month offshore non-deliverable forward contracts were quoting at 50.04/19, weaker than the onshore spot rate, indicating a bearish outlook for the currency in the near term.