India rupee at 2-week low despite likely RBI support.

MUMBAI, March 21 (Reuters) - The Indian rupee fell to its weakest level in two weeks on Wednesday, despite upbeat sentiment in local stocks and suspected dollar sales by the central bank to shore up the domestic currency.

The rupee ended at 50.66/67 to the dollar, close to its low of 50.68, a level last seen on March 7, and weaker than Tuesday's close of 50.39/40.

Traders said dollar demand from oil importers and payments related to defence equipment purchase hurt the local currency in early trade, and could have likely prompted the Reserve Bank of India to intervene near 50.63-50.65 levels.

The rupee partially recovered in afternoon trade on the back of a bounce in local stocks and gains in the euro since the single currency is tracked by local traders for cues on global risk appetite.

"But strength in INR looks very fleeting," said Naveen Raghuvanshi, associate vice-president of foreign currency trading at Development Credit Bank.

"And after a possible temporary resistance near 50.35, we could see a slow move back towards 51 as the global economy is still shaky and oil is still holding high."

India imports more than 80 percent of its oil requirements and the country's oil refiners are the major buyers of dollars in the domestic currency market.

Traders fear that in coming days, pressure from the oil refiners for dollars could rise if tensions between the West and Iran result in possible financial sanctions on countries buying oil from Tehran.

New Delhi buys nearly 12 percent of its oil needs from Iran and the United States has left China and India on its list of countries that could face sanction for buying Iranian oil.

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Some traders, however, hold on to view that any sharp slide in the rupee will be actively controlled by the central bank through intervention.

The RBI sold a net $7.3 billion in January in the spot market, after sales of $7.8 billion in December, data released by the RBI last week showed.

Indian shares posted their second straight rise on Wednesday to close up 1.65 percent, their best single-day percentage rise in nearly two weeks, led by export-focused software companies and financials on renewed growth hopes.

The one-month offshore non-deliverable forward contracts were at 51.13.

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 50.72, on a total volume of $4.84 billion.

Source : in.reuters.com