MUMBAI, Aug 31: The Indian rupee weakened on Thursday tracking the fall in Asian currencies, especially the yen, against the US dollar. Traders said dollar buying by state-run banks on behalf of oil companies who had to meet their month-end commitments pushed the rupee lower.

The partially convertible rupee was at 46.54/55 per dollar, down from 46.51/52 at the previous close. The rupee has gained 1.06 per cent from a three-year low of 47.04 hit last month, but is still 3.1 per cent lower during the year.

The overnight weakness in the yen has led to rupee opening weaker. But the dollar is very ranged in the absence of any fresh triggers and may settle in a 46.50-46.60 band for the day, said Rohan Lasrado, a currency trader at Mumbai-based HDFC bank.

But some such as Commerzbank believe the Indian rupee may gain on the back of a declining current account deficit.

The current account deficit is forecast to decline in the course of 2007 on the backdrop of continously strong service exports and a deceleration in import growth, it said in a recent note.

India's current account gap swelled to $10.6 billion in the year ended March 2006, from $5.4 billion in the previous year.

Commerzbank expects the rupee to gain to 44.50 in the next year.—Reuters