Money & Banking

Rupee falls below 54

Priya Nair Mumbai | Updated on December 14, 2011 Published on December 14, 2011

BL13MACRO-RUPEE

The rupee’s free fall continued as it touched 54.67 in a market plagued by worries such as high inflation, slowdown in economic growth, capital outflows.

In the absence of any positive cues, further weakness in the rupee cannot be ruled out, said dealers.

The rupee recovered to 53.72 after touching a low of 54.67 earlier in the day. It had opened at 53.62. On Tuesday, the rupee had closed at 53.23.

The rupee continued to weaken as there was strong dollar demand from importers including oil companies. But there was also dollar selling by software companies, which helped the rupee recover from the intra-day lows, said forex dealers.

According to a dealer with a public sector bank, concerns such as slowdown in economic growth, high inflation rates and flight of capital still remain. These factors are exerting pressure on the rupee.

The weak euro in the overseas market also added to the negative sentiments against the rupee. With the dollar gaining strength, the fear is that emerging markets could see further capital outflows.

Though wholesale price inflation for November at 9.11 per cent is lower than 9.73 per cent in October, it is still higher than expected. That also led to a fall in the domestic equity indices.

“The expectation among market participants was that inflation would be lower than 9 per cent. However, since it is still above 9 per cent, the fear is that the RBI may not cut interest rates. At best, it may just take a pause from its rate hikes,’’ the dealer said.

Published on December 14, 2011
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