JOIN USThe rupee hit the historic low of 55.03 against the dollar on Monday on the back of a strong demand for the greenback by importers but the Reserve Bank of India was not seen intervening in the forex market.
Although bankers attributed it as a short-term weakness, traders said intervention by the central bank was necessary to check the fall.
The steeply falling rupee also had an effect on the Indian benchmark Sensex, which pared its early gains to end with a modest gain of 30.51 points.
The rupee plunged to a record low for the third consecutive day. Finance Minister Pranab Mukherjee said on Sunday that the rupee’s slide was a matter of grave concern and the Centre was trying to resolve the situation.
In that light, traders said they were bracing for new measures from the RBI. The central bank has largely failed to prevent the rupee's falls this month, despite selling dollars and taking steps to attract inflows via deposits and exporters' foreign currency holdings.
According to Abhishek Goenka, CEO of India Forex Advisors Pvt. Ltd, even if the RBI intervened in the market, it would not be able to support the rupee.
“In spite of the Euro trading stable at 1.27 levels, the rupee was seen depreciating to a new low against the dollar, showing persisting risk aversion in the market. If the rupee continues to trade above 55 levels, we could see it targeting 56 levels as well,” he said.
Agreed IDBI Bank Head of Treasury N S Venkatesh, “The rupee breaching Rs 55 is a bit of worry as this has been seen as a strong resistance level. However, we expect the government to come up with some measures, which will help the domestic currency to pull back from the current levels.”