Rupee hits more than two-year low; RBI intervenes

By Neha Dasgupta

MUMBAI (Reuters) - The rupee hit a more than two-year low against the greenback on Friday as domestic shares fell after an underwhelming stimulus package from the European Central Bank, forcing the Reserve Bank of India to sell dollars via state-run banks.

The rupee tumbled to 67.01 to the dollar, the lowest since Sept. 4, 2013, from its previous close of 66.6525/66.6625.

Traders said the RBI likely stepped in to support the rupee at around 66.98 per dollar, sparking a rebound. The local currency was at 66.8600/8650 per dollar as of 12:11 p.m.

The disappointment over the ECB comes amid growing worries of the impact on India and other emerging markets as the U.S. Federal Reserve gears up to raise interest rates for the first time in around a decade this month.

Foreign investors sold a net $1.7 billion in Indian shares and debt in November, the highest sales since August.

"Unless RBI intervenes in a big way, rupee will remain under pressure," said Ashtosh Raina, head of FX trading at HDFC Bank in Mumbai.

Some traders anticipate the rupee to fall to 67.50 to the dollar closer to the Fed policy meeting on Dec. 15.

The rupee fell 2.1 percent against the dollar last month, its biggest drop since August, and is down 0.3 percent so far in December.

The fall in the local currency on Friday tracked a retreat in domestic shares after the ECB disappointed markets with a smaller-than-expected stimulus measure. India's broader NSE index fell 0.9 percent.

The limited easing measures come as Fed Chair Janet Yellen, speaking before Congress' Joint Economic Committee on Thursday, said the United States may be "close to the point at which we should be raising" rates.

Markets will eye the U.S. jobs data due later in the day for further cues on Fed rate move, although a rate hike is broadly being priced into the currency, traders said.

(Reporting by Neha Dasgupta; Editing by Subhranshu Sahu)