Rupee, Sensex fall after RBI chief's surprise decision to step down in September

MUMBAI (Reuters) - Rupee slipped to its weakest in nearly a month, while stocks fell and bond yields rose after central bank governor Raghuram Rajan's surprise announcement over the weekend that he would quit after his term ends in September.

The central bank was spotted selling dollars to curb the fall in the local currency, three traders said.

At 0336 GMT, the rupee was trading at 67.5300/5325 to the dollar, after hitting 67.70 to the dollar, its weakest since May 24. The currency had closed at 67.08/67.09 to the dollar on Friday.

The benchmark 10-year bond yield was up 4 basis points to 7.54 percent. It had closed at 7.50 percent on Friday.

The one-year OIS rate was bid at 6.71-6.73 percent while the five-year OIS rate was bid at 6.83-6.89 percent, traders said. The one-year swap closed at 6.68 percent and five-year at 6.77 percent on Friday.

The Nifty was down 0.67 percent.

Rajan's abrupt decision to quit came as he increasingly felt he lacked support from his political bosses Finance Minister Arun Jaitley and Prime Minister Narendra Modi, according to friends and colleagues.

(Reporting by Neha Dasgupta, Suvashree Choudhury and Swati Bhat; Editing by Shri Navaratnam)