NEW DELHI: The rupee fell to a 32-month low against the dollar on Tuesday as worries about Europe's debt crisis and a worsening domestic economy pushed up demand for the US currency.
The rupee fell nearly a percentage point to hit 50.70 to the dollar in morning trade -- its weakest since March 2009.
"The currency is suffering from global risk aversion which is likely to increase rather than decrease, as well as from weakening domestic macroeconomic fundamentals," Dariusz Kowalczyk, economist at Credit Agricole, told AFP.
The rupee is already Asia's worst performing major currency this year, having tumbled by close to 12 percent against the dollar so far in 2011.
The currency was hovering in a range Tuesday between 50.40 and 50.70 and analysts say the rupee could test the 51 to the dollar mark soon if the euro weakens further.
A jump in Italian borrowing costs has raised fresh worries that Europe's debt crisis will spread.
Money has flowed out of India, other emerging markets and the eurozone into assets such as US treasury bills, which are considered safe bets in times of crisis.
The rupee's slump comes at a bad time for India which is battling near double-digit inflation.
A falling rupee pushes up the cost of imports such as oil on which the energy-starved country is dependent. Oil refiners are the biggest dollar purchasers in the local currency market.
India's economic growth is already slackening as a result of 13 interest rate hikes since March 2010 to curb inflation, which at 9.73 percent is the highest among major global economies.
The rupee touched a record peak of 39.4 to the dollar in February 2008.
