Rupee hits new low; RBI intervention eyed

244

Mumbai: The slide in the Indian rupee continued Tuesday, dropping to another all-time low at 53.29 per dollar intra-day as demand for the green-back from importers and banks rose amid global uncertainty that left investors opting for the US currency.

A depreciating rupee will make oil imports costlier, again increasing pressure on oil retailers to hike prices of at least de-regulated fuel like petrol.

The rupee started on a weak note at about Rs.53.10 to a dollar at the Interbank Foreign Exchange compared to its previous close of Rs. 52.84/85 per dollar. Data on industrial output that reported a decline of 5.1 percent in October, worse than what industry and experts had earlier feared, had triggered a decline in the currency Monday.

Bearish sentiments took a strong grip on domestic equity markets which led to foreign investors selling their interests, again leading to increased demand for the dollar.

The currency has lost 16 percent in the past four months itself.

Eyes are now on the Reserve Bank of India (RBI), whether it will intervene again in arresting the rupee’s decline like it did in September and October. The central bank had sold $845 million and $943 million in September and October respectively to support the currency, according to data available with the RBI.

It did not buy any dollars in both months.

Analysts expect pressure to continue on the rupee at least in the short term because of the country’s large current account deficit, which has tripled to $14.1 billion in the April-June quarter of current fiscal, when compared to the previous quarter.

The difference between a country’s imports of goods, services and its exports is called current account deficit.

For the whole of 2011-12, current account deficit is expected to be around $54 billion.