Rupee falls to 2-month low, erases post-reform gains !!!

The rupee fell to its lowest in early two months after data showing a record trade deficit and a contraction in factory output stoked fears about economic growth at a time of continued high inflation. The rupee's fall to as low as 55.12 to the dollar has erased a rally sparked by the government's announcements of a slew of fiscal and economic reforms in mid-September that took the local currency to as high as 51.32 to a dollar on Oct 5. However, the rupee has steadily slipped since that peak, as investors resumed their focus on an economy set to grow at its slowest pace in a decade and on little prospects of immediate rate cuts as Reserve Bank of India retains its focus on inflation. The trade deficit "is negative on the rupee. The uptrend in headline WPI into 8 per cent has come into radar now. The rupee will need strong support from the euro to prevent extended weakness beyond 55.10," said Moses Harding, head of asset liability management at IndusInd Bank.