Mumbai: The rupee fell sharply to 42.87/88 to a dollar today as heavy losses in the stock markets and a spike in oil prices raised market fears of an economic slowdown.

The partially convertible rupee ended at 42.87/88 to a dollar, off a low of 42.95, but still 0.5 per cent weaker than Friday's close of 42.66/67. It hit a 13-1/2 month low of 43.21 per dollar in late May.

The Thai baht closed at 33.23/25 after earlier hitting a five-month low of 33.41.The currency is still up 1.35 per cent so far this year.

The Thai central bank is reported to have intervened to stem losses in the baht triggered by soaring world oil prices and more foreign selling in the stock markets.

The South Korean won, down 9.4 per cent so far this year, also fell to a one-week low against the dollar. The won recovered some of its early losses as investors remained on the lookout for possible government dollar-selling.

Asian currencies are expected to remain under pressure from high oil prices and inflation that is likely to curb demand.

Dealers said the Reserve Bank of India could have sold dollars in the market at around 42.93 levels to curtail a sharp depreciation in the rupee.

The Bombay Stock Exchange sensitive index fell 3.25 per cent to its lowest close in nearly three months after losing as much as 4.7 per cent in intraday trade. It shed 5.1 per cent last week and is down about 26 per cent so far in 2008.

The rupee has been gaining on the back of huge foreign capital inflows in recent years. Overseas investors have so far dumped $4.7 billion of Indian stocks this year, pushing the rupee lower by 8 per cent.

While the rupee rose more than 12 per cent last year, driven by $17.4 billion of capital inflows into the record-breaking stock market, high oil prices could widen India's trade deficit and increase demand for dollars from refiners.

Oil prices, which rose to nearly $140 a barrel on Friday, eased back on Monday, bur were still ruling around $138 a barrel.