MUMBAI, Aug 21 Reuters The Indian rupee dropped on Wednesday to log its worst singleday performance in nearly two months as dollar demand from importers and foreign banks wiped off nearly all of the currency39;s gains from earlier in the week.

The rupee closed at 83.9225 against the U.S. dollar, down 0.16 from its close at 83.87 in the previous session, its sharpest single day decline since June 26.

It shed gains after touching a twoweek high of 83.7550 on Tuesday. The dollar index rose 0.1 to 101.5, recovering slightly from a fall to its over sevenmonth low earlier in the day.

The local currency has weakened 0.2 over August so far even as its Asian peers have rallied on the back of a near 2.5 fall in the dollar index.

Strong dollar demand from importers alongside outflows from equities have weighed on the rupee, traders said. Overseas investors have net sold over 2.5 billion of Indian stocks over August so far.

Additionally, some exporters have refrained from dollar sales anticipating further weakness in the rupee, which has weighed on the overall supply of dollars in the market, a foreign exchange salesperson at a private bank said.

Traders will pay attention to the minutes of the Federal Reserve39;s July meeting and revisions to U.S. payroll data, both due later in the day.

The market seems to be in the mood to sell dollars. Fuel for that dollar selling today could be some benchmark revisions to US job numbers, ING Bank said in a note.

Sharply lower revised…