MUMBAI -- The Indian rupee Monday dropped to its lowest level in eight weeks against the U.S. dollar as a sour risk sentiment globally pushed some regional stocks and currencies lower.
The dollar rose above the psychologically crucial level of 55.00 rupees in morning trade, helped also by demand for the greenback from oil companies to make import payments, traders said.
At 0625 GMT, the dollar was at 55.03 rupees, after having risen to 55.15 rupees earlier in the session. The dollar was at 54.90 rupees in late Asian trade Friday.
Investors in India are worried that the government, instead of reducing spending, is relying on its estimates of higher tax revenue in the next fiscal year starting April to meet its fiscal targets.
Finance Minister P. Chidambaram Thursday said the government was targeting a fiscal deficit of 4.8% of gross domestic next year, down from 5.2% this year. But, New Delhi's total expenditure is budgeted to rise by 16%, compared with 10% growth this fiscal year.
The rupee is down 2.1% against the dollar since Mr. Chidambaram presented the federal budget Thursday.
The Bombay Stock Exchange's benchmark 30-share S&P BSE Sensex index was down 0.5% Monday morning.
The U.S. decision to cut spending by $85 billion is also weighing on the Indian currency as the step will likely hurt global economic growth and impact investments in India.
In China, the Shanghai Composite dropped 2.9% after Beijing introduced new policies to control the country's property market. In Australia, the S&P ASX 200 was down 1.4%, as local resources companies fell.
Traders said the Reserve Bank of India's decision Friday to withdraw its restrictions on dealers' open position limits on the rupee will help improve liquidity in the currency market.
The RBI had in late 2011 reduced the net overnight open position limits of banks to curb speculation and protect the local currency from sliding.
