The rupee on Monday plunged below the psychological level of 55 to the dollar to close at a new all-time low of 55.04 amid robust demand for the US currency from banks and importers, but there was no visible Reserve Bank of India (RBI) action to shore it up. The piercing of the 55 level has upped the prospect of further falls unless the central bank takes measures or intervenes more aggressively, traders said.
Forex dealers said though rupee plunged to record low levels for the third day in a row, the central bank was conspicuous by its absence. Dealers, however, said RBI could intervene with more policy measures when markets resume.
?The rupee breaching 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,” said NS Venkatesh, head of treasury, IDBI Bank.
He also said rupee is likely to appreciate on Tuesday as additional liquidity from the exporters’ Exchange Earner’s Foreign Currency accounts will be added to the system.
TS Srinivasan, general manager (treasury), Indian Overseas Bank, said there is a short-term weakness. “Going ahead, the central bank is likely to intervene without which the weakness in the currency is likely to continue,” he said.
The depreciating rupee cast its shadow over the Indian benchmark Sensex, which pared its early gains to end with a modest gain of 30.51 points.
On Sunday, finance minister Pranab Mukherjee had said: that the steep fall in the rupee was worrisome. “It is a matter of great concern. We are watching the situation. The Centre is not (sitting) idle. We are trying to resolve (the issue),” Mukherjee had told reporters in Kolkata.
