NEW DELHI: The rupee fell by 7 paise to 66.85 against the US dollar in early trade on Monday, tracking weakness across other Asian currency markets.

The domestic currency had closed at a two-year low of 66.76 to the dollar on Friday.

Currency market investors are keenly awaiting the second quarter GDP numbers and October industrial output data scheduled for release later in the day. The Reserve Bank of India (RBI) policy review, slated for Tuesday, is also keenly awaited, even though the apex bank is largely expected to maintain status quo on the key policy rate.

On Monday, Asian currencies including the Korean won (down 0.53 per cent), Indonesian rupiah (down 0.43 per cent), Malaysian ringgit (down 0.42 per cent) and Thai baht (down 0.17 per cent) were trading lower in the morning trade.

The Chinese yuan and Japanese yen were largely flat.

Experts believe RBI may not defend the rupee in the near future, given its relative outperformance compared with other =emerging market (EM) currencies.

"We reckon so, as governor Rajan has indicated that the fair value is around Rs 62-64/USD. At the same time, it is understandable that RBI will not want to waste forex reserves to fight cross-currency pressures from dollar appreciation as the rupee has outperformed EM peers," brokerage BofA-ML said in a note.

The rupee has depreciated 5.59 per cent this calendar, compared with 18 per cent fall in ringgit and 10.52 per cent drop in rupiah.

"That said, the balance of payments will still clear even if FPI equity flows do not revive, limiting the fundamental case for depreciation. Further, seasonality should assert itself in favor of the rupee in the March quarter. Our forex strategist sees rupee at 65 per dollar in March," the foreign brokerage said.

Source :economictimes.indiatimes.com