Monday, August 19, 2013

Rupee falls to 62.45 to a new record low

The Indian rupee opened at its weakest ever against the US dollar on Monday morning. The partially convertible rupee dropped over 1 per cent to hit a record low of 62.45 surpassing the previous low of 62.03 hit on Friday.

The rupee traded at 62.25 as of 09.50 a.m. as against Friday's close of 61.65 against the greenback. The BSE Sensex dropped over 240 points, while the 50-share Nifty benchmark slipped below the key 5,450 levels.

The rupee has now decisively breached the 62 levels despite several measures announced by the Reserve Bank and the government.

Analysts have blamed the sharp fall over the last two sessions to the RBI's latest measure announced last week. The central bank on Wednesday announced measures to restrict how much citizens and companies can invest abroad, but these steps have raised fears of outright capital controls, traders said.

The latest measures would further undermine the confidence of foreign investors, traders said.

According to data from market regulator Sebi, FIIs sold stocks worth Rs. 563 crore on Friday.

Analysts say policy makers will need to unveil a credible plan to attract foreign inflows to support the rupee.

"The RBI has done enough to support the rupee, but unfortunately nothing has worked because markets are fixated on growth. RBI should look beyond these measures," forex expert Moses Harding told NDTV.

Deven Choksey, managing director of domestic brokerage KR Choksey said signals from RBI that it is ready to bring down rates to drive growth would be enough to retain capital in the markets.

Slammed by the opposition for what it called the UPA government's "financial mismanagement," Finance Minister P Chidambaram said on Friday that the sharp falls in domestic markets that sent the rupee to a record low were a reaction to global developments and he expected calm to return.

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