The rupee sank by a staggering 110 paise to life-time low of 58.16 against dollar on Monday, making the struggling economy further vulnerable as imports become costlier, inflation risks rise and the already record high current account gap widens further.
A confluence of negative factors including heavy dollar demand and slowdown in capital inflows put pressure on the rupee, which has slumped by 8 per cent from 53.80 on April 30. Forex traders said there were no visible signs of RBI intervention to arrest the slide but expectations are high that the central bank will come with restrictions on banks’ overnight net long positions to reduce the volatility and speculation like it did last year.
The finance ministry tried to sooth the frayed nerves with economic affairs secretary Arvind Mayaram saying: "If you see weakening of all currencies vis-a-vis dollar, the rupee is also not unaffected in that sense. But I think this is panic (in) the market which is unwarranted." The RBI want silent as usual there was bloodbath on the forex market.
At the Forex market, the rupee commenced lower at 57.18 and immediately touched a high of 57.17. The local currency further reeled under pressure to register a low of 58.16 and concluded at 58.15, a whopping fall of 109 paise or 1.91 per cent. Rupee's earlier intra-day record low was 57.32 on June 22, 2012. Previously, rupee had tumbled by 124 paise, or 2.57 per cent, on September 22, 2011 and by 119 paise, or 2.47 per cent, on November 12, 2008.
Last Friday's better-than-expected US jobs data appears to have given the dollar a new lease of life as economic recovery of the world's largest economy means US Fed will probably scale down its monetary stimulus programme soon.
