Rupee weak for second week; bonds gain on growth worries

The rupee completed a second weekly loss as international investors pulled money from the nation's stocks on concern the European debt crisis is worsening. Foreign funds sold $278 million more local shares than they bought in the first three days of the week, exchange data show, taking net sales this month to $395 million.

European Central Bank president Jean-Claude Trichet said June 22 risk signals for financial stability in the euro area are flashing "red" as Greece's debt crisis threatens to infect banks. The rupee declined 0.3% for the week to 44.9975 per dollar at close in Mumbai, according to data compiled by Bloomberg.

The currency weakened 0.1% on Friday. The Dollar Index, which tracks the greenback against the currencies of six major US trading partners, gained 0.5% this week to 75.36. Offshore forwards indicate the rupee will trade at 45.61 to the dollar in three months, compared with expectations for a rate of 45.57 on Thursday and 45.48 at the end of last week.

Bonds completed a third weekly gain this month on speculation the 10 increases in benchmark interest rates since the start of last year will slow economic growth and inflation. The securities rose after the finance ministry sold 12,000 crore ($2.7 billion) of debt due in 2016, 2022 and 2032 on Friday.