The rupee on Monday broke through its earlier low of 52.73 hit on November 22 to end at an all-time low of 52.84 to a dollar on the back of worse than expected IIP numbers.
While European cues continued to remain negative, it was largely domestic news that saw the rupee depreciate on Monday. “It’s a mixture of both international and domestic sentiment, but more due to the bad domestic news, with the weakest IIP data in two years, that led to the rupee’s fall against the dollar,” said Pramit Brahmbhatt, CEO, Alpari Financial Services.
According to Brahmbhatt, much of the negative sentiment emanating from the euro zone has already been factored in by the currency markets. “Now the rupee’s behaviour is more to do with the domestic market,” he said, adding if the rupee sustains its current level on Tuesday, it could depreciate further to touch 53.20 to a dollar.
In recent days, the Reserve Bank of India’s tone on the rupee has become more aggressive, with the central bank saying it will use all possible measures, including strategic capital controls, if the risk of the rupee depreciating escalates.
Last week, RBI governor Duvvuri Subbarao said the bank would make a “definitive statement” on the rupee’s fall at its next rate-setting meeting on Friday.