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Concerns for Indian economy rise as rupee dips to record low

MUMBAI -- India's rupee hit a record low against the dollar on Wednesday and stocks fell nearly 2 percent, as uncertainty over the eurozone debt crisis and weak domestic indicators hit Asia's third-largest economy.

The Indian unit fell to 54.43 rupees to the dollar in early afternoon, breaching its previous intraday lifetime low of 54.30 struck on Dec. 15.

Traders said they expected the rupee to fall further in coming days with risk aversion hitting global markets and sentiment souring about India because of its ballooning fiscal deficit, slowing economy and political logjam.

“Global uncertainty is in the driver's seat,” said Priyanka Kishore, forex strategist at Standard Chartered Bank. “There is a tangible risk of the rupee moving towards 55 rupee to the dollar levels,” she told AFP.

The Indian currency has fallen more than 10 percent since March despite persistent interventions from the central bank, which has regularly bought dollars and only last week announced new measures to support the local unit.

Exporters and other foreign-exchange earners were ordered last Thursday to convert half of their total foreign-exchange earnings kept in banks into rupees, but the move failed to prevent the decline.

The falling rupee is bad news for India's economy, pushing up import prices and aggravating inflation that is running at over 7 percent, limiting the central bank's scope to roll back interest rates and spur the economy.

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An employee of a multinational company waits to deposit Indian rupee notes at a bank in Mumbai on Wednesday, May 16. India's rupee hit a record low against the dollar on Wednesday, dragged down by escalating fears over the eurozone debt crisis and weak domestic indicators, traders said.(AFP)

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