Rupee slumps to record low at 55.39 vs US dollar, RBI still absent
The rupee hit a record low to the US dollar for the fifth straight session today, weighed down by large dollar demand from oil firms and weak global risk sentiment, especially after Fitch downgraded Japan's ratings.business Updated: May 22, 2012 20:16 IST
The rupee hit a record low to the US dollar for the fifth straight session on Tuesday, weighed down by large dollar demand from oil firms and weak global risk sentiment, especially after Fitch downgraded Japan's ratings.
The falls came even after the Reserve Bank of India announced on Monday measures to target arbitrage and speculation in futures and options markets, with traders saying this market segment was too small to have a big impact.
The RBI has announced a string of measures to curb the rupee's falls, none of which has so far succeeded. It has also intervened aggressively earlier this month though it has been largely absent since Thursday.
"There was huge demand from oil firms. Later it turned into complete panic with the Japan downgrade, euro and pound falling and equities also turning negative," said Vikas Chittiprolu, a senior foreign exchange trader with state-run Andhra Bank.
The rupee fell to an all-time low of 55.47 per dollar, before closing at 55.39/40, as per SBI closing rates , compared to its Monday close of 55.03/04.
The local unit accelerated its falls against the dollar after Fitch cut Japan's sovereign ratings as a political stalemate dims the chance that the country can curb its snowballing debt.
Although the rupee is now well below the key psychological level of 55 to the dollar, the RBI has refrained from intervening even as NDFs point to further falls.
The one-month NDF closed at 55.86 on Tuesday while the three-month ended at 56.60.
Some traders said the market had become too volatile because of the worsening global environment and the RBI's presence would only add to that volatility.
However, analysts still left open the possibility of surprise measures, probably in the form of direct dollar sales to oil importers or some type of sovereign bond issuance, adding the RBI or the finance minister would need to adopt big measures to stop the rupee's falls.
"Policy makers will need to take dramatic action soon if they want to stabilize the INR," Dariusz Kowalczyk, a strategist at Credit Agricole, wrote in a report.
Kowalczyk added he the rupee could touch 57 to dollar ahead of the Greek elections in mid-June and cited "extreme" pessimism among the clients in India he had recently visited.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 55.49 on a total volume of $6.06 billion.