The rupee on Monday sank by a staggering 110 paise to life-time low of Rs. 58.16 against dollar, making the struggling economy further vulnerable as imports become costlier, inflation risks rise and record high CAD worsens.
A confluence of negative factors including heavy dollar demand and slowdown in capital inflows put pressure on the rupee, which has slumped by 8 per cent from Rs. 53.80 on April 30.
Forex traders said there were no visible signs of RBI intervention to arrest rupee slide but expectations are high that the central bank will come with restriction on banks overnight net long positions to reduce the volatility and speculation like it did last year.
Finance Ministry tried to sooth frayed nerves with Economic Affairs Secretary Arvind Mayaram saying: “If you see weakening of all currency vis-à-vis dollar, rupee is also not unaffected in that sense. But I think this is panic (in) the market which is unwarranted.”
The RBI Governor D. Subbarao in a recent interview to PTI had said the central bank does not target any level or band for the rupee against the dollar.
At the Interbank Foreign Exchange (Forex) market on Monday, the rupee commenced lower at Rs. 57.18 and immediately touched a high of Rs. 57.17. The local currency further reeled under pressure to register a low of Rs. 58.16 and concluded at Rs. 58.15, a whopping fall of 109 paise or 1.91 per cent. Rupee’s earlier intra-day record low was Rs. 57.32 on June 22, 2012.
Previously, rupee had tumbled by 124 paise, or 2.57 per cent, on September 22, 2011 and by 119 paise, or 2.47 per cent, on November 12, 2008.
Last Friday’s better-than-expected U.S. jobs data appears to have given the dollar a new lease of life as economic recovery of the world’s largest economy means U.S. Fed will probablt scale down its monetary stimulus programme soon.
Experts are already forecasting the battered rupee to sink further to near 60-levels. “Unless, RBI takes some kind of steps to stabilize the currency, the rupee may touch 58.50-58.90 level against dollar,” said Hemal Doshi, Chief Currency Strategist, Geojit Comtrade.