Rupee plunges to record low of 53.35 per USA dollar

13 Dec 2011 Evaluate

The Indian rupee plunged to an all time low of 53.35 against American dollar after getting a disappointing industrial output data, slowdown in economic activities and concern over ongoing debt crisis in Europe, which may dampen global risk appetite.

The rupee has been under pressure because of the rising import bills and slower export growth, which is expected to enlarge the Current Account Deficit (CAD) to $54 billion by the end of the current financial year.

Today, in early trade the partially convertible rupee was at 53.31/32, which is 17.8% less compared to its year-high in late July. The rupee has closed down 1.5% pm December 12 at 52.84/85. The outlook for Indian rupee, which is also worst performing currency this year, remains bearish.

On the current decline in rupee, experts are of the view that rupee will be in bearish mode because there is demand but no supply and this situation will continue until the global debt crisis is resolved.

India is also experiencing an outflow from the stock market after the government data on December 11 showed October Index of Industrial Production (IIP) decline to -5.1% which lowest since June 2009. And last week government also done downward revision in its growth forecast at the time of slowdown in domestic and global demand.

Traders have the view that if Reserve Bank of India (RBI) does not intervene then rupee may touch 55 per American dollar. Analysts are of the view that India may face its worst financial crisis in decades if it fails to stop decline in rupee, as a result, RBI has difficult task of using its limited reserves to maintain the confidence of foreign investors.

Against to the belief that the RBI has been keeping its hands off the foreign currency market, as per the RBI's Current Statistics data, the RBI intervened in the foreign exchange market in a row selling $943 million in October 2011. And during September it had sold $845 million. However, did not buy any dollars.

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