ET:Rupee sinks to new low of 56.18 despite RBI 'intervention'
MUMBAI: The rupee sank to an all-time low against the dollar for the sixth straight day Wednesday, breaching 56 for the first time despite likely intervention by the RBI.
The partially-convertible Indian currency fell to 56.18 against the dollar, below its previous record low of 55.46 a day earlier, as demand for the US currency grew.
The Reserve Bank of India (RBI) is thought to have intervened at 55.79, which saw the the rupee strengthening to 55.52, before it again sunk.
The bank has a policy of not commenting on movements in the forex market and any interventions.
Domestic problems, including India's widening trade and current account deficits and declining foreign fund inflows, have depressed the rupee, analysts say.
The rupee, also weighed down by global risk aversion, is among several emerging market currencies which are depreciating against the dollar.
The Indian currency has now fallen nearly ten percent in the new financial year started April.
Overseas funds withdrew a net $292 million worth of Indian equities in the same period, pulling down local share prices nine percent.
There has also been pressure from oil importers, who exchange rupees for dollars when they buy crude for energy-scarce India, which imports four-fifths of its crude oil needs.
C. Rangarajan, the Chairman of the Prime Minister's Economic Advisory Council, on Wednesday said he hoped for the RBI to announce new measures which would help improve foreign funds inflows and reduce strain on the weakening currency.
Rangarajan said selling dollars directly to oil importers was an option the RBI may want to consider.
"What is really needed is to revive sentiment to enable large capital foreign flows," Rangarajan told a news channel.
Finance Minister Pranab Mukherjee last week blamed the deteriorating international climate for the falls as investors sell risky emerging market assets and retreat to safe havens.
Foreign investors have also been turned off India due to recent regulatory moves by the government, which has stalled on a pro-growth reform agenda.
