MUMBAI – The Indian rupee sank to a record low for the fourth successive trading day on Monday, breaking the key level of 55 to the dollar amid global uncertainty.
The partially convertible Indian unit fell to a new low of 55.05 in late afternoon trade, below its previous low of 54.91 hit on Friday, as demand for the US currency grew. It later clawed back marginally to 54.97.
Local foreign exchange trade was steady on Monday morning after G8 leaders said they wanted Greece to remain in the eurozone, but global concerns brought back jitters during the day.
While Europe’s debt crisis has weighed on the unit, it has also been hit by a plethora of domestic problems including India’s widening trade and current account deficits and slowing foreign fund inflows.
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.
There was no immediate sign of fresh central bank intervention after the rupee’s dive on Monday, although the bank is thought to have stepped in to prop up the currency more than a dozen times this year.
“I am pessimistic about the entire scenario. The RBI (Reserve Bank of India) cannot think of selling more dollars each time,” said Abhishek Goenka, chief executive of consultancy firm India Forex.
Many analysts and traders expect the rupee to fall further in the coming days with risk-aversion hitting global markets and sentiment souring over India due to its gaping deficits and slowing economy.
The RBI’s deputy governor Subir Gokarn has said the bank will “use all its available tools” to curb rupee volatility.
Finance Minister Pranab Mukherjee last week blamed the deteriorating international climate for the falls as international investors sell risky emerging market assets and retreat to safe havens.