Rupee falls below 52 level,down 14.3 this year

RBIs ability to intervene in forex market to arrest the fall is limited: Finance Ministry

Making imports more expensive,the rupee touched the 52 per dollar mark for the first time in nearly 33 months on Monday as domestic equities weakened,oil importers bought dollars and euro zone debt crisis deepened. The Indian currency plunged by 81 paise to close at 52.15/16 against the US dollar.

The rupee has now fallen 14.3 per cent in the last 11 months. It is the fourth most depreciated currency in the world and the most depreciated in the Asian continent. On Monday,there were indications that the RBI intervened in the market by selling dollars in order to stem the rupee slide, said a banking source.

A major reason for the rupee fall was due to the finance ministrys comments that Reserve Banks limited ability to arrest the fall. The RBIs ability to intervene in forex market is limited, Department of Economic Affairs Secretary R Gopalan told reporters in New Delhi.

Last week,RBI Deputy Governor Subir Gokarn had said the RBI would be careful about using foreign exchange reserves currently at 314 billion aggressively to protect depreciation of the rupee.

Reacting to the rupee fall,Assocham secretary general DS Rawat said,We do not believe in maintaining artificial exchange rates. The RBI cannot afford to intervene as Indias foreign exchange reserves are not very huge. However,the RBIs statement that it will not intervene could best have been avoided to curb speculation. Portfolio flows to India have dried up significantly this year,driven initially by the poor fundamental outlook and subsequently by political and corruption concerns.

Though a weak rupee benefits exporters,the depreciation is a matter of concern for India as it depends on imports for over 70 per cent of its oil and gas requirements and the depreciation of the local currency has made imports more expensive. The depreciation of the rupee comes at a time when the headline inflation has remained above the 9 per cent-mark for 11 consecutive months.

Dealers also said the rupee was weighed down by continued dollar demand from importers,mainly oil refiners,for their month-end requirements amid expectations of further rise in dollar overseas on lingering European debt worries.