Indian rupee weakens as stronger dollar weighs

MUMBAI, Aug 25 (Reuters) - The Indian rupee weakened on Monday as the dollar rose against a host of currencies, with heavy demand for the U.S. unit from local oil refiners adding to the downward pressure.

The partially convertible rupee ended at 43.79/80 per dollar, 0.8 percent weaker than Friday's close of 43.425/435. It hit a 17-month low of 43.87 last week.

The rupee has shed 2.8 percent in August, taking its losses to 10 percent so far in 2008.

"Rupee depreciated due to the dollar's recovery against majors and other Asian currencies. There was also some dollar demand from oil companies and squaring of short speculative dollar positions,"said L. Subramanian, the chief dealer with ICICI Bank.

One-month offshore non-deliverable forward contracts PYNDF were quoting at 43.96/44.03, weaker than the onshore rate.

The British pound hit two-year lows against a broadly stronger dollar on Monday, with stalled UK economic activity seen as another example of growing economic malaise outside the United StatesDealers said dollar demand from oil refiners, the largest buyers of the U.S. currency in the local market weighed on the local unit.

Oil CLc1, India's biggest import, was trading above $115 as some investors saw buying opportunities after prices posted their biggest one-day slide in percentage terms since 2004 in the previous session. See [O/R].

Indian shares posted a modest gain on Monday after an early rally ran out of steam. Foreigners have been net sellers of more than $7 billion of stocks so far this year, a sharp turnaround from 2007 when record net inflows of $17.4 billion pushed the rupee towards 10-year highs.