The Indian rupee extended weakness in the last hour of trade, slipping past the 64.50 mark against the U.S. dollar. The partially convertible currency fell over 2 per cent to hit 64.60 against Friday's close of 63.20.

The rupee tracked weaker offshore rates as sustained foreign selling in equities continued to raise concerns about the gaping current account deficit. Traders also said importer demand for dollars was pressuring the rupee.

Monday's fall has dashed hopes of sustained recovery in the rupee, which on Friday saw the biggest bonce in nearly one year. Friday's gains had come after six straight sessions of losses.

Finance Minister P. Chidambaram met foreign investors on Saturday to seek suggestions on attracting dollar inflows, according to local media reports. The reports quoted Secretary for Department of Financial Services Rajeev Takru as saying the government could announce some measures in 8-10 days.

India urgently needs to attract capital as foreign institutional investors (FIIs) have sold about $4.2 billion in bonds this year. Adding to concerns, overseas funds are also shedding some of their stock positions, having sold about $750 million in equities over the previous six sessions.

Still, traders remained sceptical about whether India can attract foreign capital to help narrow a record high current account deficit despite the surge in debt yields, as growth is stuck at a decade low while an expected wind down in U.S. monetary stimulus is expected to hit emerging markets.

Earlier this week, Mr Chidambaram had said the rupee was undervalued even as the Reserve Bank chief defended liquidity tightening steps.

The rupee fell to a record low of 65.56 last week, and has lost more than 14 per cent so far this year.

Meanwhile, stock markets rallied for a third straight day.

(With inputs from Reuters)



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