Rupee to drop on euro worry; import payments

The rupee could test fresh 2-1/2 year lows on Tuesday after doubts over European policymakers capacity to contain the region's debt crisis kept risk appetite subdued and pushed Asian equities and the euro lower.

At 0233 GMT, the MSCI index of Asian shares ex-Japan was down 0.52% and the Nifty India stock futures traded in Singapore were 0.54% lower, suggesting a subdued start to the local market.

The euro was at USD 1.3632 from USD 1.3664 at end of rupee trade on Monday, while the index of the dollar against six major currencies was at 77.454 points from 77.304 points previously.

The partially convertible rupee is seen opening around 50.35 against the dollar and could weaken to as much as 50.45 -- a fresh two-and-a-half year low -- if dollar demand from oil importers stays strong.

On Monday, it had closed down 0.3% at 50.285/295 after hitting 50.4250 during trade, its weakest since April 28, 2009.