MUMBAI, June 4 (Reuters) - The Indian rupee dropped on Thursday, backing further away from seven-month highs struck in the previous session, weighed down by lower domestic stocks and the dollar's strength against majors. At 10:30 a.m. (0500 GMT), the partially convertible rupee was at 47.31/32 per dollar, 0.5 percent weaker than 47.07/08 at close on Wednesday when it rose during trade to 46.75, its strongest since Nov. 5 last year. "The dollar was majorly oversold, it had to correct and so the rupee is also weakening. But in the medium to long term, the rupee will strengthen," a senior dealer with a foreign bank said. The dollar mostly held its ground on Thursday after a big reversal from 2009 lows on comments from Asian monetary officials and weaker-than-expected U.S. data that took the wind out of a risk rally in other major currencies. [FRX/] Sources told Reuters that Asia's biggest central banks believed that even if a U.S. ratings cut were to occur, it would not cause China, Japan, India and South Korea to change their reserves policies because there are no alternatives to the liquidity afforded by the dollar. [ID:nSP412010] Dealers said losses in the stock market also weighed. Indian shares .BSESN were trading down 1.1 percent, in line with regional markets, as poor U.S. economic data encouraged investors to cash in gains after a sharp rally. [.BO] The main stock index has rallied about 85 percent since early March, powered by foreign buying of more than $6 billion. The inflow has lifted the rupee 10.3 percent from a record low of 52.2 in early March.

Source