Falling for the third straight session, the rupee on Thursday declined 21 paise to hit a 10-month low of 56.38 against the US dollar, on strong dollar demand from oil firms, as RBI govenor D Subbarao warned of risks on the external account.
Subbarao’s comments on inflation still being high and concerns over the current account gap affected sentiments as it dimmed chances of rate cuts. “Growth is significantly moderated, inflation is somewhat off its peak but there are several upside risk factors, the balance of payments is under stress and investments have to pick up,” he said.
Ahead of expectations of steady US GDP and jobs data that may force the Federal Reserve to consider early withdrawal of stimulus, the US dollar strengthened against major rivals.
“The rupee fell towards close due to the governor’s comments,” said Hari Chandramgethen, head, foreign exchange trading, South Indian Bank.
In three-day downmove, rupee plunged by 81 paise or 1.45%. In May so far, it has dropped by over 4.5%.
Considering the global trends, the rupee is likely to revisit record lows of 57-level, analysts said.