Rupee falls on worries over Government fate

The rupee fell to its lowest in nearly a week on Thursday as Trinamool Congress (TMC), a key ally of the country's ruling coalition, withdrew its support, raising worries the government may roll back key reforms such as the hike in diesel prices.

Prime Minister Manmohan Singh's government is widely expected to survive the blow to its parliamentary strength, but the planned withdrawal by the TMC in opposition to the diesel and retail reforms announced last week will put the fate of the government in the hands of regional parties.

Investors are especially worried the government will roll back some of its measures, and fear the political crisis could threaten future reforms in sectors such as pension and insurance. The government is considering a limited rollback in the diesel price hike but will offer no U-turn on allowing foreign investment into retail chains, sources told Reuters.

At 10:05 a.m. local time (0435 GMT), the rupee was at 54.27/29 to the dollar from its Tuesday close of 54.01/02. It fell to 54.42 earlier in trade, its lowest since September 14. The market was closed on Wednesday for a religious holiday.

Local stocks were also lower, with the Sensex down 0.5 percent. The rupee has gained over 2 percent since the government announced a steep hike in diesel prices and opening up the multi-brand retail sector to foreign direct investment. Via

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