Wait and Watch: Will the rupee best its 2009 worst of 52.17?

Will the Indian rupee surpass it’s worst ever rate of 52.17 against the dollar in a decade? If the rupee in its present temprament is anything to go by, it may just best its worst bottom.

Since the opening up of India’s economy in 1991, the rupee was at its worse in March 2009 when it hit 52.18 against the dollar and as the rupee dances perilously close to 52 against the dollar, March 2009 and November 2011 look like they are drawing closer to an embrace.

At 12.12 p.m. the Indian rupee stood at 51.36 against the dollar.

The partially convertible currency closed around 50.90 per dollar on Thursday and followed it up with a further dip in performance early on Friday, hitting 51 against the dollar - which is also a near 33-month low for the currency.

The Indian rupee is also so far already the worst performing Asian currency .

Meanwhile, the Reserve Bank of India is in a wait and watch mode, saying they will intervene in the forex market “as and when necessary”.

“We intervene when there is a very strong movement in a particular direction or extreme volatility and the objective is to smooth that volatility and not fix a rate,” the RBI Deputy Governor Subir Gokarn had earlier said .

While some analysts say the rupee may sustain its slide, due to a combination of unfavourable global and local factors, others support the RBI’s stand of not intervening in the management of exchange rate.

Laurence Balanco, technical analyst at CLSA told CNBC TV-18 on Thursday that the rupee could dive all the way to 58 against the dollar if it fell to the 52 mark.

And, while that may seem like an extremely pessimistic view, Arvind Virmani India’s executive director at the IMF and a former Economic Council Advisor, lauds the RBI for exercising restraint.

“It’s a good policy, it’s good for the economy and I see no reason to change it….because changing it would have enormous consequences - not just now but also in the future,” Virmani said, adding, “Distorting the exchange rate market, you will not solve the problem which is creating thsi problem. You can’t use exchange controls or exchange interventions to solve other problems.”

But, in India we believe paisa bolta hai and it’s only the rupee that will tell whether the analysts are right or whether the rupee made the RBI a fool.

Watch Arvind Virmani’s with CNBC-TV 18: