* Rupee ends at 62.66/67 vs pvs close of 61.9275/9375
* RBI's Rajan says inflation a 'destructive disease' -
* Cbank seen intervening in late trades via state-run banks
By Subhadip Sircar
MUMBAI, Jan 24 The Indian rupee fell to a
two-month low on Friday, posting its worst week in five months,
as local shares slumped mirroring a global selloff, with the
central bank's policy review next week to set the tone for the
The rupee's fall was driven by steep losses in shares, as
investors fled markets in Asia and Latin America, fearing the
impact of a slower growth in China as highlighted by a weak
factory activity report on Thursday, and expectations that the
U.S. Federal Reserve will cut further its bond-buying stimulus
at a policy meeting next week.
The local currency weakened ahead of the Reserve Bank of
India's rate review on Tuesday, where it is expected to keep
rates steady on easing inflation.
However, a recent central bank report suggesting that the
RBI targets retail inflation has led to concerns that interest
rates may remain high for an extended period of time.
Reserve Bank of India Governor Raghuram Rajan called
inflation a "destructive disease" that was forcing the central
bank to keep monetary policy tight, according to a report from
news agency Press Trust of India on Thursday carried in the
website of The Economic Times newspaper.
The comments led to added worries among investors about the
direction of interest rates.
"I don't see RBI will do any rate cuts on Tuesday as it will
consider the inflation rate based on CPI data, not on WPI," said
Aanand Patankar, a senior option trader with SAK Forex Market
The rupee weakened sharply in late trades as stop-losses got
triggered with the central bank likely stepping in to stem
losses, dealers said.
"RBI was seen controlling the rupee above 62.50 levels,"
The partially convertible rupee closed at 62.66/67
per dollar compared with its close of 61.9275/9375 on Thursday.
It fell to a low of 62.73 during the session, a level last
seen on Nov. 22. On the day, it fell 1.2 percent, its biggest
fall since Nov. 11.
For the week, it was down 1.8 percent, its biggest fall
since Aug. 30.
In the offshore non-deliverable forwards, the
one-month contract was at 62.88 while the three-month was at
FACTORS TO WATCH
* Yen, franc, euro sought in risk-asset rout, aussie trounced
* Wounded stocks hit 4-month low after Thursday rout
* Emerging markets' sell-off accelerates on China, Fed worries
* Foreign institutional investor flows
* For data on currency futures
DIARIES & DATA:
Indian Data Watch European diary
Indian diary US Diary
(Editing by Subhranshu Sahu)