Rupee plummets to a record low below 62 a dollar

The rupee hit a record low below 62 a dollar on Friday as every move announced by the Reserve Bank of India (RBI) over the past one month to curb foreign currency outflows from the country continued to backfire.

The rupee plummeted below the crucial 62 mark against the US dollar at 10:20 am today, down 0.9 per cent from its Wednesday's close of 61.43.

The rupee's plunge comes on the back of RBI's decision on Wednesday to impose capital controls, including curbs on overseas investments and remittance by residents.

In the inter-bank foreign exchange market, the rupee was trading at an all-time low of 62.03 a dollar in early morning trade, against its Wednesday's close of 61.43 a dollar, or 24 paisa lower than its previous closing of 61.19.

Since end-May the Indian rupee has depreciated by nearly 9 per cent.

The rupee's previous record low was at 61.80 hit on 6 August.

Tracking the rupee, the BSE Sensex plunged more than 800 points and was down 769.41 points at 18598.18 at 4.00 pm. Similarly, the NSE Nifty hit a low of 5,496.05 and was down 234.5 points (-4.08) at 5,507.85 near the close of trading on Friday.

Stocks slid over fears that foreign capital could flow back to the US as the American economy improves.

The RBI kept its reference rate for the US dollar at Rs61.8195 and that of the euro at Rs82.4510 and for the UAE dirham at Rs16.83.

RBI had, on Wednesday, announced a reduction in the limit for overseas direct investment (ODI) under automatic route for all fresh ODI transactions, from 400 per cent of the net worth of an Indian party to 100 per cent of its net worth. RBI also reduced the limit to remittances made under the ODI scheme by Indian companies for setting up unincorporated entities outside India in the energy and natural resources sectors.

This reduction in limit, however, will not apply to ODI by Navratna PSUs, ONGC Videsh Ltd and Oil India in the oil sector.

Resident Individuals have, however, now been allowed to set up joint venture/wholly owned subsidiaries outside India under the ODI route within the revised LRS limit. Current restrictions will continue on the use of LRS for prohibited transactions, such as margin trading and lottery use of LRS for acquisition of immovable property outside India, directly or indirectly.

The present set of measures is aimed at moderating outflows. RBI expects such measures to help bring down demand for US dollar in the domestic currency market.