Rupee falls to record low, spurs RBI to act
MUMBAI (Reuters) - The rupee hit a record low against the dollar for a second session in a row on Thursday as global risk assets remained largely under pressure, leading the Reserve Bank of India (RBI) to intervene again, according to traders.
Though global risk assets avoided the steep falls seen in the previous session, the mood remained grim given the political uncertainty in Greece and the challenges at home.
How aggressively the RBI defends the currency will be key in the near-term.
On Wednesday, the central bank had intervened in the morning but was then seen largely in the sidelines as the rupee broke below the previous record low hit in December, but that changed on Thursday after the currency again hit an all-time low.
"India has already had one failed attempt to prevent record highs on USD/INR and will need to try harder to avoid a test of 55.00," Westpac Bank said in a note.
The rupee slumped to a new life low of 54.60 to the dollar, surpassing the previous session low of 54.52. The RBI stepped in to prevent a wider rout, multiple dealers said.
The cross settled at 54.48/49, in range with Wednesday's close of 54.49/50, as per State Bank of India data.
Dealers said liquidity was thin in the forex market with bid-ask quotes often wide.
Local stocks ended mildly positive with the BSE Sensex up 0.25 percent, but that was a fraction of earlier stronger gains.
The RBI has already taken steps like asking banks to sell half of the foreign currencies in their accounts, as well as raising the interest ceiling that local banks can offer to overseas Indians for their forex accounts.
Possible next steps by RBI may be opening a dollar tap directly for state-run oil companies.
The one-month offshore non-deliverable forward contracts were at 54.83.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 54.59 on a total volume of $4.4 billion.
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Finance Minister Arun Jaitley said on Thursday that the government was working to tighten up risk management in the banking sector, responding to recent scandals that have raised doubts about lending practices at state banks. Full Article