Rupee hits record low; at 58.16/US$

No RBI intervention despite steep fall: Traders

Written by ENS Economic Bureau | New Delhi | Published: June 11, 2013 4:27 am

The rupee fell 110 paise on Monday to an all-time low of 58.15/16 to the US dollar on continued strengthening of the greenback against other major global and emerging market currencies.

The rupee’s fall has escalated concerns about the country’s current account deficit,especially in light of the fact that foreign funds have divested from the Indian debt market,pulling out about $3 billion in the last three weeks. The sharp fall complicates the task for policy makers looking to revive a flagging economy,with analysts predicting that the RBI could turn more cautious on pruning interest rates at its upcoming policy review on June 17 because a rate cut will have an impact on capital inflows that are desperately needed to finance the record deficit.

The partially convertible rupee closed at 58.15/16 per dollar after hitting a life low of 58.17. The currency fell 1.9 per cent from Friday’s close of 57.06/07.

While for policy makers,the continuing fall in the rupee presents a growing challenge,those benefiting from the trend include companies such as Reliance Industries Ltd and state-owned Oil and Natural Gas Corporation,which bill their consumers — including fertiliser plants and power stations — in US dollar. Exporters too stand to gain if the trend continues.

On Monday,the dollar rose against the yen and other major currencies,extending gains made after Friday’s US jobs report left open the prospect of the Federal Reserve scaling back the stimulus shortly.

The dollar index,which measures the greenback’s strength against major world currencies,strengthened 0.34 per cent to touch 81.9450 by late evening trade.

On the stock exchanges,shares ended flat on fears the central bank would hold off from cutting interest rates,even as IT companies surged on hopes of improving returns from overseas markets.

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