The Indian rupee on Thursday hit an intra-day record low of Rs. 56.51 against the US $, before recovering slightly to close at Rs. 56.13 on dealers and investors buying the US dollar due to weak global markets.
Though the Indian currency opened on a weak note due to weak GDP numbers, it stabilised later amidst speculations that the Reserve Bank of India (RBI) has directed oil companies to buy dollars only from nationalised banks. However, a senior HPCL official denied the reports later in the day.
“Problems in the euro zone has left traders and investors jittery and they are rushing in to buy US dollars, appreciating the currency,” said Ashok K Gautam, head global markets, treasury, Axis Bank. “Also the Indian currency market has become thin and there is an apparent demand-supply mismatch so any small buy or sell has a spiral effect, which was not the case earlier.”
Industry experts said that the rupee’s fall was more due to international factors than domestic ones. GDP concerns would, however, scare off already-stressed foreign institutional investors, they added.
Fears about the European Union’s “sweeping reforms” to shift the burden of rescuing failing banks from taxpayers to bondholders, further pushed investors to safer heavens. Euro has depreciated by 0.92% in the last two days and is trading at a low of 0.18% (at 1.2389) against the dollar.
“What we believe is that the fall of the rupee will be protected from here on, but otherwise it could touch Rs. 56.70 creating a room for Rs. 57 against the dollar in short term,” said Gautam.