Rupee hits a record low of 61.80 a dollar

The rupee fell to a record low of 61.80 against the dollar today, piercing through the previous low of 61.21 a dollar reached on 8 July, amidst rising dollar demand from importers.

The rupee started trading on the interbank foreign exchange market lower, at 61.05 per dollar, against the previous closing level of 60.88 per dollar, and dropped further to hit an all-time low of 61.79 per dollar before paring some losses at 61.43 a dollar in the morning trade.

There have been no signs of RBI intervention to prevent the rupee fall so far in the session, dealers said.

The Indian currency has lost 12.6 per cent since the beginning of May amidst heavy dollar outflows from stock markets and speculative currency trades.

The Reserve Bank of India, which is handicapped by a record-high current account deficit and a steadily rising inflation, could do precious little to prop up the rupee from its steady plunge.

On 15 July, the RBI had unveiled fresh new measures, including raising short-term interest rates, to drain market liquidity and prop up the rupee, but without much effect.

The rupee's plunge coincides with the announcement of chief economic adviser Raghuram Rajan's appointment as the new governor of the Reserve Bank of India, in place of the retiring D Subbarao

"The government and the Reserve Bank are working together to address these challenges," Rajan told reporters soon after his appointment was announced.

"We do not have a magic wand to make the problems disappear instantaneously. But I have absolutely no doubt that we will deal with them."

The RBI, which has so far been squeezing rupee liquidity to arrest the decline of the currency, is unlikely to do much to stem the rot, at least for the present.

Markets are now looking at the Manmohan Singh government to announce substantial reforms or raise more debt overseas so as to attract further investment flows into the country for the rupee to stabilise.