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Category: Global Economy Sub-category: Indian Economy
Document type: news
The rupee fell to a new record low in early trade the 23rd of May, approaching the key psychological level of 56, as another bout of risk aversion swept global markets on eurozone concerns. The partially convertible fell as much as to 55.86 to the dollar. It closed at 55.39/40 on 22nd May.
Fall comes despite RBI intervention earlier in the session pushed rupee to 55.52. Traders call the action "mild", say they expect further falls in rupee.
Traders expect some dollar selling from exporters to emerge around 55.80 levels.
Managing rupee is market-related... there is a lot of volatility. However, the government has been taking a series of steps to arrest the volatility in the foreign exchange market and the Reserve Bank of India would intervene when necessary.
The Indian currency has been the worst performing among its Asian peers, having lost 22 percent this year.
Global risk aversion is putting pressure on the domestic currency as foreign funds are pulling out money. Besides, a widening current account deficit and concerns of investment in India is also putting pressure on the rupee.
To check the sliding rupee, RBI has taken a slew of policy steps to increase dollar flows, including relaxing interest rates caps on non-resident deposits and asking exporters to convert half of their foreign currency earnings into rupee.
The depreciating rupee is also pulling back the domestic stock markets into the red, offsetting all attempts of a bouncebank by the markets.
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