European debt crisis keeps rupee weak

India's rupee was little changed, holding this week's losses, on concern Europe's debt crisis will worsen and damp demand for the nation's assets. The BSE India Sensitive Index fell for a fifth day. The gauge sank to a 28-month low after global funds pulled $233 million (Dh855 million) from Indian stocks last week and $75 million on Monday, exchange data show. European Central Bank President Mario Draghi said on Monday substantial risks to the economy remain and the law forbids him from increasing government bond purchases to fight the crisis. Sharp moves "The European concerns are here to stay until we have something more concrete from the policy makers there," said Vikas Babu, a currency trader at Andhra Bank in Mumbai. "The market is also quite illiquid as there is no speculative money, so we have to expect sharp moves." The rupee was little changed at 52.89 a dollar in Mumbai, compared with 52.885 on Monday, according to data compiled by Bloomberg. It has declined 0.3 per cent this week after reaching a record low of 54.3050 on December 15. The currency rallied 1.7 per cent on December 16 as the central bank announced measures to curb speculation. The Reserve Bank of India said last week companies can't enter into multiple forward contracts to cover a single overseas transaction, and allowed microfinance lenders easier access to overseas funding, according to statements on the monetary authority's website. India plans to ease restrictions on overseas borrowing and allow companies to raise dollar loans at higher costs, two government officials with direct knowledge of the matter said yesterday.