* Rupee falls to 54.08/09/dlr vs prev close of 53.56/57.l
* RBI seen keeping rates on hold despite political pressure
* USD selling seen by wind-energy company, large refiner
MUMBAI, Oct 29 (Reuters) - The Indian rupee fell to its
lowest in over a month on Monday, weakening past the 54-level
against the dollar, as caution prevailed ahead of the central
bank's policy review and as the euro was dragged lower by
uncertainty over Greece and Spain.
Most analysts expect the Reserve Bank of India to keep
interest rates on hold on Tuesday, although they remain open to
a cut in the cash reserve ratio, or the amount of deposits
lenders must keep as cash with the central bank.
A decision not to lower India's repo rate would defy growing
political pressure on the central bank.
Finance Minister P. Chidambaram on Monday said the country
was aiming to keep the fiscal deficit for this financial year at
5.3 percent, higher than the official target of 5.1 percent, but
much lower than the 5.8 percent pegged by market estimates.
Still, the absence of any specific measures failed to spark
any gains in the rupee. After the close of markets, the RBI said
the reform efforts were a move in the right direction but again
warned inflation remains a risk.
"If the RBI delivers a rate cut, or hints at one, we may see
some large gains towards the 53.50-53.20 zone," said
Subramanian Sharma, director at Greenback Forex.
"However, if the RBI does not cut, the rupee weakness should
not extend beyond 54.20."
The partially convertible rupee closed at 54.08/09
p er dollar versus its previous close of 53.56/57. It fell to a
session low of 54.09, its lowest since Sept. 21.
A rate cut would boost the rupee by raising confidence in
India's economic outlook, and by potentially leading to
increased foreign flows into domestic stocks.
However, the falls in the rupee on Monday signalled markets
see such an outcome as unlikely, with domestic stock indexes
ending largely flat.
The rupee's losses were magnified by weakness in the euro
which continued to be hobbled by uncertainty over whether
Greece can agree to a deal on austerity and by the lack of signs
Spain would request aid.
Dealers cited some dollar selling by a wind energy company
as well as a oil refiner earlier in the session, which helped
the rupee contain some losses.
In the offshore non-deliverable forwards market, the
one-month contract was at 54.41 while the three-month was at
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
54.3950 with a total traded volume at $4.7 billion.
(Editing by Rafael Nam)