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The rupee continued to remain weak on Wednesday. Losing about one per cent against the dollar, the rupee dropped to 56.24 at close. The rupee had dropped to levels of 56.38 last week before pulling back apparently on RBI intervention.
Government sources had indicated to Business Line that policy tools may be used to hold the rupee at close to Rs 53-54/$. The rupee has depreciated 25 per cent against the dollar since a year ago.
External factors
In the same period, the dollar has appreciated 15 per cent against the Euro.
Experts have interpreted this to indicate that 60 per cent of the rupee's depreciation is due to external factors — global risk aversion, the Greek problem, and so on.
Prolonged inflation
Domestic factors have also contributed to the weakness. As the head of research for a large financial services group put it, “The corrections that you see in the currency are because of prolonged spells of inflation.
“It may have happened in an abrupt manner. But the RBI must draw the right conclusions and focus on inflation management.”
Call rates, G-Secs
Call rates ended at its highest in the day’s trade at 8.20 per cent. It stayed range bound with a low of 8.00 per cent after closing at 8.12 per cent on Tuesday.
The benchmark 8.79 per cent government bonds ended trade at Rs 101.70 with a yield of 8.52 per cent.
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