MUMBAI The rupee fell to a record closing low on Friday, posting its worst week in 22 months, raising concerns the RBI is losing the battle to prop up the currency while the government has yet to take any meaningful measures to bring in inflows.
The rupee weakened ahead of key U.S. employment data, which will help shape expectations about when the Federal Reserve will start tapering down its monetary stimulus.
The currency fell 3.4 percent this week, and is below the levels at which it was trading on July 15 when the Reserve Bank of India unveiled its cash tightening steps to defend the currency.
Investors have started questioning the central bank's resolve after Governor Duvvuri Subbarao said this week it would roll back measures to defend the rupee if the currency stabilises, while the government has yet to take steps such as a sale of overseas bonds to ensure real money flows.
The RBI has, instead, been relying on interventions to support the rupee. Traders said the central bank likely intervened again on Friday as the rupee came within a whisker of its record low of 61.21 seen on July 8.
"The RBI is sprinkling water. It should intervene in a massive way for a day or two to support the currency and bring it back to a comfortable level to hit speculators hard," said K.N. Dey, a senior forex consultant.
The partially convertible rupee closed at 61.10/11 per dollar compared with 60.43/44 on Thursday.
Investors will focus on dollar movements after the U.S. jobs report. The monsoon session of parliament is due to start on Monday, with important legislation such as a food security bill pending.
In the offshore non-deliverable forwards, the one-month contract was at 61.66, while the three-month was at 62.56.
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 closed around 61.45 with a total traded volume of $2.6 billion.
(Editing by Jijo Jacob)
Trending On Reuters
Ready for Rate Hike
Two years ago India was a "fragile five" economy growing at 5 percent, facing a severe current account deficit and the rupee at record lows as the U.S. Fed Reserve prepared to taper its stimulus programme. Today, two years into the term of RBI Governor Raghuram Rajan, India is set to confidently face the Fed's first rate rise since 2006. Full Article