16 MAY, 2012, AGENCIES
MUMBAI: The rupee today fell to a five-month low by losing 47 paise to 54.26 against the US dollar on the Interbank Foreign Exchange market in early trade on increased capital outflows amid strong demand for the greenback.
It fell below the previous session low of 54.15 and is fast approaching a record low of 54.30 hit in December as global risk aversion intensified. The rupee had touched a record intraday low of 54.32 on December 15, 2011.
Forex dealers said apart from the dollar's gains against the euro and other currencies overseas on renewed eurozone worries, a weak opening in the equity market and increased demand for the American currency from importers mainly put pressure on the rupee.
Meanwhile, the BSE benchmark Sensex was down by 252.07 points, or 1.54 per cent, at 16,076.18 in early trade.
Most traders cited no central bank intervention yet, though a a few dealers said the Reserve Bank of India might have sold mildly around 54.10 levels. Dealers will closely watch for any RBI intervention to protect the level.
A spokesperson from First Rand Bank told ET Now that rupee may breach levels of 54.30 and touch new lows.
The rupee's fall is proving to be a challenge for companies dependent on imports for sourcing inputs. Already, some firms have indicated that they are looking at a price increase to pass on a part of this rise in costs to consumers. While the absolute level of the rupee is a matter of concern, what is more troublesome is its sustained downward slide.
The RBI also accepted that it is fighting a losing battle in trying to stem a fall in the rupee, a slide that has mirrored the slump in the once high-flying emerging market. The force of dollar demand is such that the RBI can do little to check the fall, RBI officials said.
"We may prop the rupee for sometime by this way or that, but it is not enough," a senior central bank official directly involved in currency management said.
The RBI has spent more than $20 billion in spot market intervention between September and March, and stepped into markets since, including on Tuesday. It has carried out several other measures to try to check the fall in the currency, which hit a record closing low on Monday of almost 54 per dollar.
Portfolio investors are fleeing, scared away by a slowdown in economic growth and large current account and fiscal deficits, stalled policymaking and a controversial proposal to tax foreign investment.
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