Indian rupee slumps to record low

Tourists in India are getting more for their dollar

By Staff and wire reports

MUMBAI, India -- Domestic political turmoil and a weak global economy are pulling India's currency to fresh lows.

The rupee ended Tuesday trading at 46.85 against the U.S. dollar, after early sell-offs saw the currency briefly touch a historic low of 47.10 to the greenback before bouncing back.

One trader said Indian importers have been buying dollars as a hedge against what they fear could be a weakening currency.

The rupee has lost one percent against the U.S. dollar in the last trading week alone.

Political woes hurt currency

The currency is being hurt by political bickering between India's main political alliances over an arms scandal that was made public last month.

Local news portal Tehelka.com taped top politicians allegedly accepting bribes to help a fake company obtain a defense contract.

The fallout led to the resignation of Defense Minister George Fernandes, and other political leaders allied with the ruling National Democratic Front alliance.

"The recent political issues are not drumming up local interst to hold rupees," Rebecca Patterson, regional head of foreign exchange research with J.P. Morgan, said.

But she doesn't believe politics is to blame for all of the currency's problems.

Market sources say India's central bank could be intervening to keep the rupee weak. A softer currency could ensure that the country's products will remain competitive with others from Asia.

Reuters contributed to this report.

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