At 55 against the dollar, rupee hits fresh all-time low again

The rupee fell to an all-time low of 55 to the dollar on Monday, marking its fourth consecutive record low in as many sessions, as the euro retreated from the day’s highs and as global risk sentiment remained weak.

A combination of weak fundamentals and negative sentiment has squeezed the Balance of Payment position, thus setting up the bearish trend for rupee. The quality of inflows is also in doubt as large component is from hot money FII flows and short term debt obligations. Moreover, foreign exchange reserves have been dwindling and can now pay for just six months of imports, limiting the RBI’s ammunition to defend the rupee. It is thus expected to take further administrative measures to prop up the currency.

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Traders said corporate dollar demand and oil and defence-related dollar buying also weighed on the currency.

At 4:11 p.m, the partially convertible rupee was at 54.91/92 per dollar, sharply below its Friday’s close of 54.42/44. Traders saw no signs of RBI intervention in the currency market so far in this session.

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Moses Harding of Indusind Bank told CNBC-TV18 that the rupee has not factored-in the late Friday evening reversal in dollar index from 81.75 to 81 and rally in euro/dollar from 1.2640 to 1.28. “Ideally rupee should have opened below 54.30,” he adds. His next target is 55.25.

He added that if the rupee is unable to get benefit from the dollar reversal or euro strength, I think we are into big time trouble.

Agencies