By Swati Bhat
The Indian rupee edged lower on Friday to post its biggest weekly loss in three-and-a-half months, weighed down by demand for the greenback from oil importers and tracking losses in domestic share markets.
The euro rose but remained well within the week's range as traders awaited clarity on when and whether heavily indebted Spain would request a bailout to shore up its finances.
Inflation data due on Monday is going to be crucial for market participants in firming opinions about whether or not the central bank will lower key interest rates later this month.
Wholesale price inflation is expected to have accelerated to 7.70 percent in September, its highest level this year, according to a Reuters poll.
Factory output rose modestly in August but not enough to end a long slump in Asia's third largest economy, while consumer price inflation slowed, data released earlier in the day showed.
"It was mostly the state-run banks who were on the buy side on Friday with oil firms being among the major buyers," said A. Ajith Kumar, a foreign exchange dealer with Federal Bank.
"The rupee may be ranged between 52.20 and 53.50 next week as there are no major events except inflation which will be key. Otherwise, it will be a flow-driven market," he added.
The partially convertible rupee closed at 52.8050/8150 per dollar, down 0.2 from its previous close of 52.6850/6950.
It fell 1.8 percent on the week, its worst weekly fall since the week to June 22 when it had lost over 3 percent. The fall snapped five weeks of gains.
Traders said sentiment was largely positive for the rupee, but foreign fund flows into the equity markets will be crucial at the start of the corporate earnings season.
Indian shares snapped a five-week streak of gains as Infosys Ltd slumped after disappointing investors with its growth outlook, while caution also set in ahead of a key inflation data next week.
Oil importers were also active buyers of dollars in spot markets, pressuring the rupee on Friday.
In the offshore non-deliverable forwards market, the one-month contract was at 52.99 and the three-month at 53.50.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 52.89 with a total traded volume of around $5.82 billion.