Rupee falls 1.6% to 7-week low

The rupee hit the day’s low of 54.69 before ending the session at 54.61/$.

Risk aversion was evident from the euro's fall to an eight-week low of 1.2793/$ and the dollar index's rise to 80.70. The euro fell on concerns that Greece may not be able to meet the requirements for a bailout package. Treasurers are divided on rupee's trend from hereon with some fearing the currency could weaken further to 55/$.

Rupee has lost over 1% ever since the Reserve Bank of India (RBI) slashed the country's economic growth to 5.8% from 6.5% at the second quarter review of monetary policy on October 30. This coupled with risk aversion globally had dragged the currency down in the last one week.

“We need next phase of reforms. We need the reforms to be implemented for rupee to gain. I don't see much appreciation for rupee,” said P Mukherjee, the head of treasury at Axis Bank.

The rupee had gained 3% over the last two months after the government announced a series of measures to boost inflows which included more foreign direct investment in retail, aviation and broadcast.

Emboldened by the measures, FIIs had poured in $4 billion into equities and debt in September. Since January, FIIs have invested close to $18 billion in Indian assets.

Some treasurers expect

... contd.