Tracking the meltdown in global stock markets, the rupee on Thursday plunged by 124 paise to close at a nearly two-and-a half-year low of 49.57/58 against the U.S. dollar, posing worries to policy makers on inflation front as a weak domestic currency will make imports costlier.
Traders and bankers said the Reserve Bank of India intervened in the forex market to arrest the fall of rupee, but with little success. However, there was no official comment on RBI’s intervention.
Finance Minister Pranab Mukherjee, meanwhile, in New York said the RBI will intervene in the foreign exchange market “as and when the situation warrants”.
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“Right now, there is no such situation,” he told reporters.
During intra-day, the rupee appreciated to 48.68 against the dollar.
Forex dealers said the rupee plummeted as importers and rushed to buy dollars amid its sharp rise in the overseas markets to a 7-month high against major rivals. The greenback is seen as a safe haven, especially at a time when risk aversion is sweeping through global financial markets.
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The sharp fall in rupee comes at a time when the government is battling high inflation. A weak rupee will make imports of petroleum products costlier impacting prices. India imports 80 per cent of the petroleum products requirement.
Decline in rupee’s exchange value makes merchandise and software exporters happy as they will have better realisation.