[mkjan]

The Indian rupee fell to a one-year low on Thursday, as record high oil prices pushed up dollar demand from refiners and weak stock markets doused hopes for foreign inflows.

The partially convertible rupee ended at 41.76/77 per dollar, off an intraday low of 41.80, the weakest since April 20, 2007, according to Reuters data. The rupee had closed at 41.36/37 on Wednesday.

"Exporters cashed in at various points in the day. However, with demand outstripping supply of dollars, the rupee's fall will continue in the near term," a trader with a state-run bank said.

Oil CLc1, India's biggest import, traded above $123 a barrel, close to its record high hit on Wednesday. India imports 70 percent of its oil needs, and crude refiners are among the biggest Indian buyers of dollars.

Higher cost of oil was one factor behind a 35.5 percent widening in India's trade deficit to $80.4 billion in the fiscal year ended March.

Traders said sentiment was also weighed down by falling shares. India's main share index .BSESN dropped 1.5 percent to its lowest close in more than a week, mirroring weak markets in Tokyo, Hong Kong and Singapore.

Foreign fund flows are a key driver of the rupee. Foreigners are net sellers of equities worth $2.9 billion in 2008, after buying more than $17.4 billion in the previous year.