Indian rupee at three-week low on dollar rally; RBI buying suspected

MUMBAI (Reuters) - The Indian rupee weakened to its lowest level in three weeks on Tuesday tracking strength in the U.S. dollar, while a few traders suspected that the central bank bought the greenback through state-run banks.

The dollar rallied against the yen and other emerging market currencies amid a spike in bond yields, as accelerating vaccinations and massive stimulus in the United States stoked inflation concerns.

The partially convertible rupee was trading at 73.19/20 per dollar, its weakest since March 9, compared with its previous close of 72.51 per dollar.

Traders said there were portfolio inflows into stocks which were likely getting absorbed by the central bank after the rupee's relative outperformance versus emerging market peers in recent weeks.

The broader NSE share index and the BSE index rose 1.8% and 1.6%, respectively, as of 0751 GMT.

(Reporting by Swati Bhat; Editing by Amy Caren Daniel)