Rupee sinks to a record low of 54.51/$ as hapless RBI looks on

The rupee hit a record low of 54.51 against the dollar in the interbank foreign exchange market in Mumbai today weighed down by rising dollar outflows triggered by foreign funds and importer demand.

The rupee fell as far down as 54.52 to the dollar before ending the trading session at 54.51 a dollar.

The Reserve Bank of India (RBI), which last week announced a raft of measures to arrest rising dollar demand and stem rupee volatility and at times intervened in the market without much success, today opted to remain a mere spectator.

Commenting on the steep slide, RBI deputy governor KC Chakrabarty said the central bank intervenes in the forex market only to curb volatility and not the slide.

"We don't intervene to arrest the rupee fall, we intervene only to arrest the volatility, you must understand the difference," Chakrabarty told reporters on the sidelines of an event in Mumbai.

Also, as RBI officials themselves say, the demand for dollar is so high that the central bank can do little to check the rupee fall.