Rupee hits fresh low amid euro turmoil, policy paralysis

The plummeting Indian rupee hit yet another low today, trading at 54.75 a dollar in Mumbai trading by mid-afternoon. The rupee later recovered, tracking a recovery in domestic stocks and after RBI deputy governor Subir Gokarn said the central bank would continue to defend the currency.

Gokarn said the RBI will continue with its intervention as well as administrative measures to support the local currency, which has fallen over 10 per cent since its February peak.

The rupee has now declined 2 per cent this week - the biggest drop since the five days leading to 18 November, according to data compiled by Bloomberg. The currency has slumped 7.1 per cent since March this year.

The Reserve Bank of India is thought to have silently intervened on Thursday by selling dollars; a step it has been periodically taking over the last few months.

The rupee's one-month implied volatility, a measure of exchange-rate swings used to price options, rose 92 basis points, or 0.92 percentage point, to this year's high of 13.27 per cent.

The rupee was Asia's worst performing currency in 2011, losing more than 20 per cent of its value in the calendar year.