Rupee hits record low, breaches 54 to the dollar

Mangalore Today /NDTV

Most global currencies have weakened against the dollar over the past few days because the dollar is seen as a safe haven in times of distress. The euro has now lost 3% in three days.

The rupee continued its free fall Thursday, breaching the 54 mark against the dollar for the first time ever. It opened at 54.20 against the dollar, which is an all-time low.

The Indian currency fell to an all-time low of 54.30 before making a sharp recovery following a similar bounce in equity markets. At 1622 hours, it traded at 53.72 to the dollar against its closing price of 53.71 to the dollar yesterday.

 

This is the fourth straight day of declines for the currency. The rupee had closed at 53.71 to the dollar yesterday, a record low for the currency.

Most global currencies have weakened against the dollar over the past few days because the dollar is seen as a safe haven in times of distress. Overnight, the euro shed about a penny against the dollar to $1.29 and has now lost 3 percent in three days.

"The situation is serious. When the dollar is strengthening, there is not a whole lot Reserve Bank can do in terms of intervention... But, the RBI should prevent banks from holding long positions that will reduce the demand for dollars," Jamal Mecklai, CEO, Mecklai Financials said.

The rupee is weakening much faster than the Euro overseas. What that means is there is something else going on. That is what the RBI needs to try to arrest," he added.

Some traders expect the central bank to step into the market. The RBI governor and finance minister had met PM Manmohan Singh yesterday and discussed the causes of rupee weakness and possible policy measures. The central bank is slated to come out with a note on rupee, when it meets for its mid-quarterly review on Friday.