MUMBAI (Dow Jones)--The Indian rupee Wednesday fell against the dollar, led by strong demand for the greenback from oil importing companies and a global preference for a safer haven. In late trade the dollar was at INR44.48, up from INR44.43 late Tuesday, after dropping to a nine-week low of INR44.34 in early trade as local stocks traded higher while the euro remained firm. However, the trend turned during European trading hours as London traders shunned the euro over Moody's late Tuesday downgrade of Portuguese government bonds to junk status. The widely expected 0.25% interest rate hike by the People's Bank of China also boosted demand for dollars. "The wide interest rate differential between India and others should attract capital flows, but foreign investors have adopted a cautious stance," Ananth Narayan G, South Asia head for fixed income, currency and commodities for Standard Chartered Bank, said. He tips the dollar to be in a INR44-INR45.50 range over the medium term. Meanwhile, government bonds ended higher after some easing in oil prices revived selling in the last leg of the session. The most-traded benchmark 7.80% 2021 bond ended at the day's high of INR96.51, higher than INR96.41 at Tuesday's close. Bonds traded rangebound for most of the day in the absence of major leads, while a heavy debt supply this week continued to weigh on sentiments. The Reserve Bank of India by the end of this week would have auctioned more than INR300 billion of bonds, treasury bills, state development loans and cash management bills. The market will look forward to the weekly food and fuel inflation print on Thursday and the scheduled INR120 billion auction on Friday to determine positions. "Clearly, domestic inflation remains high and we expect the price pressures to continue at least till November," Ananth Narayan said. High inflation has led the central bank to continue with its hawkish stance despite hiking interest rates 10 times in the past year. "The recent diesel price hike would add more fuel to the fire," Narayan said. A senior dealer with a privately run bank expects yields on the 10-year bond to remain in the 8.30%-8.35% range in the rest of the week. "We would closely watch the weekly food and fuel price data tomorrow. Any negative surprise can trigger a sell-off," he said.

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