The rupee on Wednesday weakened to below 45 against the dollar for the first time since November 2006 as crude oil prices fell in New York, tempering concerns that inflation would accelerate. The Indian currency declined for a second day on fears that equity sales by FIIs and the country?s current-account deficit would result in capital outflows. The rupee?s slide came as the dollar advanced against many currencies, and dollar demand from banks in India increased.

The Indian currency on Wednesday ended at 45.12/13, 0.62% down from the previous close of 44.83/84, against the greenback after data from capital market regulator Sebi showed overseas funds were net sellers of Indian equities on nine out of the past 14 trading days. The rupee dipped as low as 45.20, intra-day.

In global markets, crude oil pared earlier gains, dipping briefly below $100 a barrel on Tuesday, on concerns that slowing economic growth would trim demand. Oil rose briefly earlier after Opec agreed to limit production levels. The poor outlook for demand weighed over the worries of hurricanes and Opec output cuts. Oil has fallen about 30% from a record $147.27 a barrel on July 11. The global price movements affected crude oil contracts on the Multi-Commodities Exchange, which declined Rs 33 to Rs 4,700 a barrel over the previous day?s close.

Analysts say contracts expiring in September should find immediate and crucial support at Rs 4,650/4,570, and will see resistance at Rs 4,738/4,795 a barrel. Forex traders are also watching crude prices closely. ?We may see crude hovering at around $100-105 a barrel,? said T Bhoumik, chief economist at Reliance Industries.

Forex traders believe RBI must have intervened at exchange rate levels of 45.05-45.15 to check further depreciation of the rupee. ?There must have been some kind of intervention by the central bank. However, the impact wasn?t felt much,? said V Rajagopal, chief currency trader at Kotak Mahindra Bank. Rajagopal believes the bearishness is likely to continue. ?Stock markets are not in good shape and capital inflows are not looking very attractive. I expect the rupee to touch 45.40-45.50 this week,? he said.

Bhoumik says RBI may not intervene in a big way until the rupee breaches the 46 mark. ?In a bid to promote export growth, which suffered in a big way last year when the rupee was appreciating, RBI may refrain from intervention in a big way,? he said.

In the recently launched currency futures market, the front-end dollar contract ended at Rs 45.29, compared with Rs 44.87 on Tuesday. Volumes stood at around 41,337, down from 51,293 the previous day. Second- and third-month contracts ended at 45.40 and 45.54, respectively, against the greenback while the one-year contract ended at 46.32.

As the fall in commodities prices tempered concern that inflation would accelerate, ten-year government bond prices rose for a second day, pushing yields to the lowest in almost three months, after crude oil in New York fell to its lowest since April. Analysts expect crude to fall below $100 per barrel. India imports almost three-quarters of the oil it uses.

The rupee is the third-worst performer among the ten most active Asian currencies outside Japan this year, with a 12.7% decline. Analysts expect the rupee?s bearishness against the dollar to continue because of higher foreign fund outflows and mounting demand for dollars from foreign banks. Analysts feel India?s adverse balance of payments position, which fell to $36.6 billion in the year ended March 31, would contribute to the rupee?s slide.

A Bloomberg News survey predicts that inflation would slow for a third week to 12.01% for the week ended August 30, when the government releases wholesale price data on Thursday. RBI governor Duvvuri Subbarao, who took office last week, said the inflation momentum is decreasing. The central bank has raised its key repurchase rate by 300 basis points since 2004 to curb price gains.