Rupee falls on dollar buying

The rupee fell on Friday on increased dollar purchases from companies and on choppy local equities, with traders eyeing the December industrial output data for directional cues on interest rates and growth.

Some traders cited local companies' need to refinance some of their external commercial borrowings, especially foreign currency convertible bonds, as the possible trigger for the increased dollar purchases.

Some analysts say two dozen Indian firms have $5.8 billion in outstanding foreign currency convertible bonds (FCCBs) that mature this year.

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At 10:20 a.m. (0450 GMT), the rupee was at 49.52 to the dollar, after hitting 49.7225, a level not seen since January 31, Thomson Reuters data showed. It ended at 49.4975/5075 on Thursday.

"There is lot of corporate (dollar) demand coming in and so are the negatives in the India growth story," said a forex trader with a foreign bank.

India's yawning fiscal and trade deficits, high inflation and political logjam hurting economic reforms, have been a drag on the currency. These coupled with a bleak global growth outlook had pushed the currency to its record low of 54.30 in mid-December. It lost nearly 16 percent in 2011.

However, rupee has surged more than 7 percent since the start of this year, driven primarily by foreign fund inflows that have touched nearly $7 billion so far.

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The industrial data due around 11:00 a.m. will be an indicator to see if Asia's third-largest economy is holding up and whether foreign investors will continue to pour in funds.

Indian industrial production (IIP) likely grew at a weaker annual rate of 3.4 percent in December, down from November's 5.9 percent, on slowing infrastructure output and domestic demand, according to a Reuters poll.

One-month offshore non-deliverable forward contracts were at 49.99.

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 ended around 49.78, on a total volume of $938 million.