By Swati Bhat
MUMBAI (Reuters) - The rupee fell on Wednesday, after the International Monetary Fund sharply cut its economic growth forecast for the country and as the dollar rallied following the naming of Janet Yellen as the next head of the U.S. Federal Reserve.
The weaker rupee came even after data showed India's trade deficit narrowed to a two-and-a-half-year low in September, which had momentarily lifted the currency during the session by raising hopes for a significant reduction in the country's gaping current account deficit.
"The dollar's strength versus majors kept the rupee's gains under control but good trade data definitely helped pull it off the session lows," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.
"I expect the unit to move in a 61.20 to 62.50 range in the rest of the week," he added.
The partially convertible rupee losed at 61.93/94 per dollar compared to 61.7925/8025 on Tuesday. The unit had dropped as low as 62.3050 ahead of the trade data.
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The dollar rose on Wednesday on market relief that President Barack Obama has tapped Federal Reserve Vice Chairwoman Janet Yellen to head the U.S. central bank, for now eliminating one source of uncertainty as the U.S. budget impasse continues.
The index of the dollar against six major currencies was up 0.4 percent.
The rupee also weakened after the International Monetary Fund cut India's growth forecast for the current year to 3.8 percent from 5.6 percent in its July survey, among the lowest forecasts by analysts or multilateral bodies.
In the offshore non-deliverable forwards, the one-month contract was at 62.48 while the three-month was at 63.44.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 62.18 with a total traded volume of $2.13 billion.
(Editing by Sunil Nair)