Continuing the downward journey, the rupee fell to a low of 53.47 to the US dollar on Thursday, its lowest level in 2012, amid growing concerns about the country’s gaping budget and trade deficits and low capital inflows.
The rupee, which had closed at 52.96/97 on Wednesday, pulled back during the day and closed at 53.41/42 — a level last seen on December 29, 2011.
“We expect dollar-rupee to trade in the 52.50-54.50 range in the two-month horizon, with a bias towards further weakness if the government fails undertake measures to curb the fiscal excesses,” said Upasana Bharadwaj, economist, ING Vysya Bank.
Experts said that there is not much room for the Reserve Bank of India to intervene to check rupee’s decline. “RBI’s hands are tied because of India’s relatively low foreign exchange reserves,” said treasury head of a public sector bank. India’s foreign reserves fell to around $295 billion on April 20 from about $321 billion in September 2012.