The rupee has broken the crucial 52 mark to the dollar, which is the all-time closing low for the Indian currency. It is now heading to all-time intra-day lows of 52.19 against the dollar. It had fallen past 51 per dollar for the first time in nearly 32 months on Friday. The rupee is the worst performing currency in Asia and has fallen nearly 15 per cent since July, 2011.
A weak trend in equity markets, where foreign institutional investor participation is low, also contributed to the slide in rupee. The Sensex closed below the 16,000 mark today, falling over 425 points. The broader Nifty index slumped 127 points to 4,778. The benchmark indices have closed at a six week low. (Read: Sensex ends below 16,000)
Rising demand for dollars, especially from oil importers, has also contributed to the slide in the value of the rupee.
Vivek Rajpal, Rate Strategist at Nomura India said people are getting nervous at these elevated levels. The RBI’s stance that they are not comfortable with intervention hasn’t helped. “If it breaches 52 for a long time, nervousness will increase,” he added.
The fall in the currency comes despite reports of an intervention by the Reserve Bank of India in the currency markets today. This has been one of the more decisive interventions by the central bank compared to recent days.
The RBI has maintained that it has limited capacity to intervene in the forex markets. Selling dollars in the market would tighten the rupee liquidity and it may also force the RBI to consider cash reserve ratio (CRR) cut or further open market operations.
AV Rajwade, Currency & Interest Rate Risk Management Consultant said the fall in rupee has accelerated due to RBI’s stance. “The RBI’s stance on ‘no intervention’ has left the market vulnerable,” Mr Rajwade said, adding that the downward slide may continue if the RBI does not intervene.

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