Rupee still falling despite RBI intervention

* Rupee at 53.47 Vs USD; RBI may slap fresh curbs on forex trading

Written by ENS Economic Bureau | Mumbai | Published:May 4, 2012 1:02 am

The rupee on Thursday slid to a new four-month low amidst policy uncertainties and worsening economic fundamentals,leading to speculation that the Reserve Bank is likely to slap fresh curbs to salvage the currency.

The Indian currency fell to a low of 53.47 to the dollar,a level last seen on December 29,2011,before pulling back to close at 53.41/42 levels — a fall of 45 paise — on RBI intervention.

According to banking sources,if the rupee crosses the 54-54.50 levels,the RBI is likely to come out with administrative tools like those it introduced in December after the rupee had hit a record low of 54.30.

On December 16,the RBI reduced the overnight open dollar positions for banks across the board and also curbed the extent to which exporters and importers can cancel and rebook their hedges or forward contracts in a bid to salvage the rupee.

The RBI has not been able to do much because of India’s relatively low foreign exchange reserves and a widening current account deficit aggravated by foreign capital outflows.

Any further intervention would also worsen an acute liquidity shortage that has seen repo borrowings surge for seven consecutive sessions.

On Thursday,the RBI stepped in to defend the currency via dollar sales for a second consecutive session,which helped slow the pace of falls.

Foreign fund inflows,critical to bridge the country’s current account gap have been drying up. Net portfolio outflows stood at $540 million over the last two months compared with $13 billion inflows in January-February.

Gold scales new peak
MUMBAI:
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ENS

Sensex tumbles 151 points
MUMBAI:
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FE

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