(Repeats to widen distribution)
* Suspected RBI intervening unable to prevent rupee slide
* Admin measures seen in place of aggressive intervention
* USD/INR on course to test record high of 54.30-traders
By Subhadip Sircar
MUMBAI, May 3 The rupee slid to an over
four-month low as India's policy uncertainty and worsening
economic fundamentals are sparking concerns a rout is in the
making, one that the central bank will be unable to prevent.
The Reserve Bank of India was seen stepping in to defend the
currency via dollar sales for a second consecutive session on
Thursday, which helped slow the pace of falls, but not
expectations the rupee could head to the record low levels hit
The central bank's hands are seen tied because of India's
relatively low foreign exchange reserves and a widening current
account deficit aggravated by foreign capital leaving the
Any further intervention would also worsen an acute
liquidity shortage that has seen repo borrowings surge for seven
This has led to speculation the RBI may resort to
administrative tools like those it introduced in mid-December
after the rupee had hit a record low of 54.30.
"INR looks increasingly helpless in the face of large trade
deficit and recent outflows of foreign equity and bond capital,"
said Dariusz Kowalczyk, senior economist and strategist at
Credit Agricole CIB.
"In the short run don't catch the falling knife," he added.
"Wait for the RBI measures before jumping in."
The rupee fell to a low of 53.47 to the dollar on
Thursday, a level last seen on Dec 29, 2011, before pulling back
to close at 53.41/42 levels. It had closed at 52.96/97 on
The next resistance for USD/INR is seen 53.51, its near term
high on Dec 29.
Continued uncertainty over a new tax proposal has also been
a recent sore point with foreign investors.
The finance minister is gearing up to introduce to
parliament a bill containing the controversial rules, and
investors are waiting to see if it includes any amendments.
Foreign fund inflows, critical to bridge the country's
current account gap have been drying up. Net portfolio outflows
stood at $540 million over the last two months compared with $13
billion inflows in January-February.
The one-month offshore non-deliverable forward contracts
were at 53.32.
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 53.725 on a total volume of $4.2 billion.