Hit hard by hefty outflows on the US Fed's plan to exit stimulus, the rupee on Thursday closed at all-time low of 59.57 against dollar retreating from nearly 60-levels on suspected RBI intervention and pep-talk by the government. At the Mumbai forex market, the rupee commenced sharply lower at 59.50 a dollar from the previous day’s close of 58.70 and dipped further to log its all-time low of 59.985 as market participants panicked after the US Federal Reserve chief Ben Bernanke said $85 billion a month bond buying programme may be slowed down from this year.
The rupee saw a marginal recovery to end at 59.57, still down 87 paise or 1.48 per cent over Wednesday's close, after chief economic advisor to finance minister Raghuram Rajan said the government is ready to take steps to curb volatility and is "not short of instruments" to tackle slide in the rupee. Continued selling by foreign funds in equities also put pressure on the rupee as overseas investors pulled out over Rs 2,000 crore today.
The dollar index was up by 0.72 per cent against a basket of six major global rivals after the Fed said it may have scope to reduce the pace of monthly bond purchases, if the economy improves in line with its forecasts, shattering the global stock as well as forex markets.
Analysts attribute the ballooning current account deficit and cloudy outlook of reforms also adding fuel to the Fed fire.The rupee woes had its reflection on the stock market too with the benchmark Sensex tanking over 526 points, biggest fall in 21 months, to end at over two month lows.
The rupee's massive fall today is also due to heavy debt outflows, said traders. The economic logic for foreign funds to invest in domestic debt instruments is withering away a yield differentials are narrowing fast, they added. Amid concerns that a weak rupee is set to make imports costlier, including oil and other commodities, and have a cascading effect on inflation, Planning Commission deputy chairman Montek Singh Ahluwalia said: "What you have seen is not a behaviour of the rupee. You are seeing the behaviour of all emerging market countries against a great deal of global uncertainty triggered as it happens in this case because of statements made by the Federal Reserve," he said.
Globally, emerging market currencies faced a torrid day with South African rand and Mexican peso down by close to 2 percent against dollar.
