The Indian rupee ended down after falling to its lowest in more than seven weeks on Tuesday, reversing early gains, after the main stock index posted its biggest single-day percentage point fall in five and half months.

Persistent dollar buying by oil importers and risk averseness of foreign investors also weighed on the unit, dealers said.

The partially convertible rupee <INR=IN> ended at 45.31/32 per dollar, after falling to 45.33, its lowest since Sept. 24. It rose to 45.08 in early trade. On Monday, the rupee had closed at 45.2250/2350.

"The rupee fell primarily because of the 2 percent fall in stocks. Also, oil importers were buying at around 45.10 levels," said Rohan Naik, head of forex trading at Standard Chartered Bank.

Indian shares fell 2.2 percent to their lowest close in nearly two months on Tuesday, as world stocks weakened on risk aversion due to worries over Ireland\'s debt woes and talk of further monetary tightening in China. [.BO] "In the immediate short term, the rupee seems to be on a weakening trend as the current trend is dictated by growth concerns and dollar\'s recent strength," said R.V.S. Sridhar, president and head of markets at Axis Bank.

Foreign inflows are tapering off as offshore investors begin to wind up their investments to avoid piling up risks close to the year\'s end, dealers said.

Foreign funds have bought shares worth a record $28.5 billion so far in 2010, compared with last year\'s $17.5 billion, which has helped the rupee gain 2.7 percent year-to-date.

Foreign funds sold $153.04 million of Indian stocks on Friday, data from the regulator shows, a sharp reversal from the $1.56 billion of total purchases on Nov. 4 and Nov. 5. On Monday, they bought $116.6 million of shares. [INFII]

"We are seeing some winding up by FIIs. I expect the pace of capital inflows we were seeing last week to cool off," Standard Chartered Bank\'s Naik said. Naik expects the rupee to move in 45.00-45.50 band for the rest of the week. Indian markets will be shut on Wednesday for a holiday.

The euro rose against the dollar and the yen on Tuesday following a stronger-than-expected reading of German economic sentiment. [USD/]

The dollar <.DXY> index, which measures the dollar\'s value against a basket of currencies, hit a six-week high of 78.744 <.DXY> earlier and was up 0.23 percent at 78.698 at close of the local market.

"The dollar rally may persist if the dollar index closes above 76.50 today," Naik said.

One-month offshore non-deliverable forward contracts <PNDF> were quoted at 45.63 to a dollar, weaker than the onshore spot rate, suggesting a bearish near-term outlook.

In the currency futures market <INRFUTURES>, the most traded near-month dollar-rupee contracts on the National Stock Exchange, MCX-SX and United Stock Exchange closed at 45.4325, 45.4400 and 45.4350 respectively, with the total traded volume on the three exchanges at an average moderate $6.6 billion.