The rupee recovered from 64 levels against the dollar after the Reserve Bank of India intervened by asking banks to sell dollar into the market.
The unstoppable Indian currency today tumbled to 64 per dollar due to heavy capital outflows from the domestic equity market.
The rupee opened at a fresh new low of 63.75 per dollar and extended its losses to 64.11 in the early trade raising serious concerns for the Government and the Reserve Bank of India.
However, it recovered to 63.50 in the afternoon trade after RBI stepped in to provide some relief. At 2.20 pm, the domestic unit was trading at 63.54 per dollar.
Breaching the 63 level on Monday, the unit had closed at 63.13 after hitting a low of 63.30 against the dollar.
A strong American currency and concerns over funding the current account deficit (CAD) amid heavy outflows by foreign investors from emerging markets are weighing on the rupee sentiment.
Currencies of emerging economies such as South Africa, Brazil and Indonesia among others have also been under pressure due to outflows after the US central bank indicated that it would start withdrawing its monetary easing policy as the US economy starts recovering.
“However, the market players are ignoring the positives of lowering CAD. Also, the US Fed’s withdrawal of monetary easing programme will not take place immediately. Hence, this is a panic situation based on negative sentiments,” Krishnamoorthy Harihar, Treasurer, FirstRand Bank, had said on Monday.
A treasury head of a public sector bank said that the RBI measures taken last month have been ineffective and fresh measures need to be addressed to improve the negative sentiment of the market investors.
The BSE-benchmark Sensex dipped to 17,000 levels by shedding 310 points (1.7 per cent) in early trade. However, the equity markets recovered, though, and were trading lower at 96 points at 18,210 points.
In addition, JP Morgan today downgraded India to ‘neutral’ from ‘overweight’ citing strain in balance of payments. This could further weaken the country's sentiment for foreign investors.
