RTTN:Indian Rupee Breaches 56 Level Against Dollar For First Time In History
(RTTNews) - The Indian rupee broke 56 level against the U.S. dollar on Wednesday for the first time in history as risk aversion aggravated on worries over Greece's possible exit from the eurozone, adding pressure on Reserve Bank of India to take some measures again to arrest its slide.
The central bank has taken several measures to stem the rupee's slide, including raising deposit rates for non-resident Indians and forcing exporters to convert half of their foreign currency holdings into rupees.
Even, the Reserve Bank of India early this week imposed restrictions of $100 million on position limit for forward contracts by banks and advised the banks dealing in foreign currency to bring down their trading limits by June-end.
But the rupee showed limited reaction to these measures.
The rupee that ended Tuesday's trading at 55.39 per dollar has lost 1.5 percent thus far today and hit as low as 56.20. This marked a record low for the seventh consecutive day.
The Indian currency has been in a downward channel against the dollar since it reached a multi-month peak of 48.57 in early February amid India's high current account deficit, lack of foreign capital flows, high inflation and failure to push through much-needed economic reforms.
The rupee was also weighed down by relentless dollar demand from oil importers and other companies.
Thus far, the rupee has lost 15.7 percent against the dollar from its February high.
A weak rupee has the effect of making foreign travel, overseas education and imports like oil and consumer goods more expensive. However, it is beneficial for exporters like software, textiles and gems and jewellery.
Investors now focus on the Reserve Bank of India's board meeting scheduled for Thursday. Analysts expect the central bank not to make major announcements.
