Rupee tumbles to 55.44 against dollar

Mangalore Today News Network/ NDTV

New Delhi,May 22, 2012 : The rupee hit another lifetime low on Tuesday afternoon, falling to 55.44 against the dollar.  Earlier in the day, the Indian currency fell to a new low of 55.07 to the dollar, its fifth consecutive all-time low, as arbitrage measures taken by the RBI late on Monday provided only a brief sentiment boost.

 

Also on Tuesday afternoon, Finance Minister Pranab Mukherjee blamed the fall in the rupee on external factors, saying it was due to a global slowdown.

 He ascribed the rupee’s precipitous slide over the past five days to the euro zone crisis and to the global slowdown, adding that the Indian stock markets as well as economic growth have been hit by the slowdown.
 

"A number of steps have been taken to augment supply of forex to stem rupee decline," he said.

It recovered shortly after and was trading just below the 55 mark through most of early afternoon

At 10:05 a.m., the partially convertible rupee traded at 54.95/00 per dollar, rebounding from that record low and strengthening from its close of 55.03/04 on Monday.

At the time, traders said some exporters were selling dollars in the market, limiting a steeper fall, but the overall bias is still towards a weaker rupee.

The bounce back from record closing lows yesterday was on the back of steps taken by the RBI late on Monday to curb arbitrage and comments from a deputy RBI governor.

The Reserve Bank of India’s Subir Gokarn said on Monday the central bank will continue to take steps to stabilise the rupee and said it expected dollar flows from exporters on Tuesday and Wednesday to convert half of their exporter earnings into the rupee.

Analysts said RBI measures will only reduce arbitrage between futures & options and  and over-the-counter markets and they don’t address the fundamental problems.

"It doesn’t change the direction, only curbs arbitrage and may reduec volatility," said Vivek Rajpal of Nomura India, adding that it was hard to define what a good level for the rupee was in the current environment.