Reuters

Mumbai, Oct 4: India's rupee closed above 47 per dollar for the first time since June 2003 on Friday as sharp losses in the share market fuelled concerns of further capital outflows while strong dollar demand from oil firms weighed.

The partially convertible rupee ended at 47.0750/0850 per dollar, nearly 1 per cent weaker than 46.62/63 at close on Wednesday, but half a per cent stronger than its intraday low of 47.30 hit in early trade, its lowest since May 2003.

The market was shut on Thursday for a holiday. "Stocks are down by more than 500 points and there is heavy dollar demand from oil companies," said Sudarshan Bhat, chief currency trader with state-run Corporation Bank. "The rupee should stay in a 47.0-47.50 per dollar band next week," he said.

India's main share index shed more than 4 percent on concerns the $700 billion U.S. bailout package may not be able to save the global economy from a slowdown. Oil, India's biggest import, was hovering around $94 per barrel. Refiners are the largest buyers of dollars in the domestic currency market.

Dealers said a stronger dollar overseas weighed on rupee sentiment, but dollar sales by some large firms helped the rupee recover from the session's lows.

The dollar on Friday eased from the previous day's searing rally, but was poised for its best weekly gain versus the euro in the single currency's lifetime after the European Central Bank opened the door to rate cuts.

Analysts said the rupee is likely to remain weak throughout this fiscal year, and may touch 48 per dollar in the near-term, weighed down by a higher trade deficit and lack of dollar inflows into the domestic market.

India's trade deficit rose to a record $13.94 billion in August, above previous month's $10.8 billion, as the cost of crude oil bloated the import bill while export growth slowed, data showed earlier this week.