ET:Rupee slides, Reserve Bank of India's intervention suspected
MUMBAI: Rupee fell to near a six-month low against the dollar on Monday before recovering slightly thanks to suspected central bank intervention, dealers said.
The unit fell to an intraday low of 53.74 rupees to the dollar -- a level last seen in December -- but then edged back up to 53.30 when the central bank is suspected of intervening, dealers said.
"The rupee is in a challenging environment, the headwinds are too strong. It is unlikely to appreciate in a hurry," said Sonam Udasi, head of research at IDBI Capital.
The partially convertible currency has been hurt by global uncertainty, weak domestic economic data, slowing overseas funds inflows and pressure from oil importers who have to exchange rupees for dollars when they purchase crude.
Energy-hungry India imports four-fifths of its crude oil needs to fuel its economy.
"The RBI ( Reserve Bank of India) likely intervened" to lift the currency of its intraday lows, a dealer with a Mumbai-based brokerage said, declining to be named.
The RBI intervenes only to prevent sharp volatility and has a policy of not commenting on rupee movements or confirming forex market interventions.
Traders said it was the eleventh time in 2012 that the central bank is believed to have stepped into the market to prop up the rupee.
The currency's weakness comes as Indian shares sit 10 per cent below their February levels. Foreign funds were net sellers of Indian equities worth for $205.5 million in April.
The RBI last month cut interest rates by a bigger-than-expected 50 basis points -- its first reduction in three years -- in an effort to spur growth.
But concerns about the country's widening trade gap, which last year hit a record $184.9 billion, and its fiscal deficit, are weighing on the currency, traders say.
The Indian unit, Asia's worst performing currency in 2011, hit a record low of 54.30 against the dollar in mid-December and then rebounded to 48.67 rupees in February, led by strong foreign fund buying of Indian assets.
But it has again slipped against a backdrop of rising global risk aversion and foreign investor wariness about Indian tax proposals and other government policies and a slowing domestic economy.
