Nov. 16 (Bloomberg) -- India's rupee fell, ending a two-day climb, on speculation a slide in Asian stocks will prompt global funds to reduce investment in the region.

The currency had its first weekly loss in almost a month as India's benchmark share index declined for a second day, deterring overseas investors from buying local equities. Funds based abroad sold more Indian stocks than they bought this month, according to the Securities and Exchange Board of India.

``Asian stock markets are significantly lower, raising concerns about a decline in capital inflows,'' said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in the southern Indian city of Kochi. ``This is pressuring the rupee lower today.''

The rupee weakened 0.1 percent to 39.3275 per dollar as of the 5 p.m. close in Mumbai, according to data compiled by Bloomberg, taking the loss for the week to 0.5 percent. The currency dropped as low as 39.395 today.

The currency may trade between 39.25 and 39.50 in the coming weeks, Paul said. The median forecast of 24 economists in a Bloomberg News survey predicts the rupee will reach 39.21 by the end of the year and 39 by March 2008.

Asian stocks fell after Bank of Japan Deputy Governor Toshiro Muto said growth could be threatened if the U.S. housing slump spreads. The Morgan Stanley Capital International Asia Pacific Index of regional shares fell 1.7 percent.

The Bombay Stock Exchange's Sensitive Index dropped 0.4 percent today, adding to a 0.7 percent loss yesterday.

Overseas investors sold Indian shares worth an average $34 million a day more than they bought this month, after making net daily purchases of $203 million in October, according to data from the capital markets regulator.

Growth, Yields

The rupee pared losses on optimism the nation's economic growth, fastest among major economies after China, will draw overseas capital. Finance Minister Palaniappan Chidambaram said on Nov. 14 the expansion will be ``about'' 9 percent this year, near the quickest since 1989.

``India remains an attractive destination for investment, given its strong growth and higher yields,'' said Sundeep Bhandari, head of global markets for South Asia at Standard Chartered Plc in Mumbai.

Asia's third-largest economy has grown an average 8.6 percent since 2004, the fastest pace since independence in 1947, attracting increased investment from overseas. Monthly foreign direct investment in India averaged $1.4 billion during the first four months of the fiscal year that started April 1, compared with $712 million a year earlier.

The rupee has gained in the past five quarters as increased inflows of investment from abroad boosted India's capital account surplus. The surplus rose to $15.3 billion in the three months through June from $10.6 billion in the year-ago quarter.

The benchmark 10-year bond in India yields 7.88 percent, compared to the 4.15 percent yield on the comparable U.S. Treasury note, according to Bloomberg data.

To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.

Last Updated: November 16, 2007 07:11 EST