* Rupee at 54.88/89 vs 54.75/76 close on Fri
* USD/INR breaks major 100-dma resistance
* Trade deficit widens to $21 bln in Oct
By Subhadip Sircar
MUMBAI, Nov 12 (Reuters) - The Indian rupee fell to its
lowest in two months on Monday after data showing a record trade
deficit and contraction in factory output stoked fears about
economic growth at a time of continued high inflation.
The rupee's fall to as low as 55.12 to the dollar on Monday
has erased a rally sparked by the government's announcements of
a slew of fiscal and economic reforms in mid-September that sen
the local currency to as high as 51.32 on Oct. 5.
However, the rupee has steadily slipped since that peak, as
investors resume their focus on an economy set to grow at its
slowest pace in a decade and on the reduced prospects of
immediate rate cuts as Reserve Bank of India retains its focus
The trade deficit "is negative on the rupee. The uptrend in
headline WPI into 8 percent has come into radar now. The rupee
will need strong support from the euro to prevent extended
weakness beyond 55.10," said Moses Harding, head of asset
liability management at IndusInd Bank.
The partially convertible rupee fell for a third
session to end at 54.88/89 per dollar, after hitting a session
low at 55.12, a level last seen Sept 13.
It had closed at 54.75/76 on Friday.
Domestic currency markets will be closed on Tuesday and
Wednesday for the Diwali holidays.
The rupee now is at near the levels when the government in
mid-September raised diesel prices and said it would ease
foreign investment rules into the aviation and multi-brand
retail sectors, sparking a rally in domestic markets.
Still, it remains well above the record low of 57.32 hit in
Traders warn more losses could be in the store, after
USD/INR ended above the 100-day moving average, which had acted
as major resistance in recent sessions.
Data on Monday showed the trade deficit widened to $20.9
billion, marking a record, according to a Credit Suisse e-mail
to clients sent after the data.
Other reports also proved worrisome for investors, with
industrial output unexpectedly contracting 0.4 percent in
September, while consumer price inflation remained elevated.
India is due to post October wholesale price index data on
Wednesday, with analysts expecting headline inflation to have
accelerated 7.96 percent, marking an 11-month high.
High inflation will likely deter the central bank from
cutting interest rates this calendar year. The RBI signalled
after its policy review on Oct. 30 any easing in monetary policy
would not come until the January-March quarter.
In the offshore non-deliverable forwards segment, the
one-month contract was at 55.15 while the three-month was at
In the currency futures market, the most-traded near-month
dollar/rupee contract on the National Stock Exchange and the
MCX-SX closed around 55.11 with a total traded volume of $5.3
(Editing by Rafael Nam)