The rupee on Wednesday plunged against the the dollar to a historic low of 54.56 before closing slightly better at 54.50 despite RBI’s intervention, raising widespread concerns about the health of the economy.
Forex dealers attributed the fall to strong capital outflows in tune with the fall in local as well as global stocks where investors are increasingly avoiding riskier assets and moving to the new safe haven - the US dollar.
At the Interbank Foreign Exchange, the domestic unit opened sharply lower at 54.06 and mostly remained bearish.
Intra-day it plunged to all time low of 54.56, surpassing the previous all—time low of 54.30 recorded in December last year.
Allaying fears, the Finance Ministry said there was no need to panic. “Rupee is falling due to global factors. There is no need to panic. The fall might continue till there is a certainty about the eurozone recovery. RBI is keeping a watch on it,” a finance ministry official said.
Dealers said RBI intervened at various levels in the market today but its efforts proved futile.
Meanwhile, RBI Deputy Governor Mr K C Chakrabarty today said the RBI intervenes in the forex market only to curb volatility and not the slide. “We don’t intervene to arrest the rupee fall, we intervene only to arrest the volatility, you must understand the difference,” he said.
As the rupee touched a record low, Opposition questioned the government in the Lok Sabha on the steps being taken to tackle the situation. “The crisis in our economy is growing.
Are we heading towards 1991?” senior BJP leader Mr Murli Manohar Joshi said during the Zero Hour.
Moses Harding, Head, ALCO and Economic & Market Research, IndusInd Bank, said fundamentals are working against rupee.
“Be it high current account deficit or fiscal deficit or liquid deficit in the system. Except, fall in crude oil prices, there is not a single supportive factor for rupee as of now. Also, dollar is strengthening against Euro, which is putting added pressure on the domestic currency,” he said.
Going forward, rupee may breach 56 levels soon, experts said. It will not be surprising if rupee touches Rs 56 level, said Indian Overseas Bank GM (Treasury) Mr T S Srinivasan.
Axis Bank CEO & MD Ms Shikha Sharma, when asked about the range of the rupee, however said 54 to a dollar is a “fair level”.