Rupee hits 57/$, but Chidambaram says nothing to worry

The plummeting rupee hurtled down to levels near its historic low, hitting 57 against a firmer dollar, even as the US currency edged higher against other currencies, gaining from the Federal Reserve's move to limit monetary stimulus.

The rupee fell despite continuing dollar flows, prompting comments from finance minister P Chidambaram that there was no cause for concern so long as capital inflows were intact.

He said the change in value was due mainly to supply and demand conditions in the market and it would correct itself.

"I think the rupee will stabilise and find its correct level," Chidambaram said on the sidelines of a banking seminar in Mumbai.

Chidambaram also called on banks to discourage investment in the precious metal by not actively supporting such investments. The government had on Wednesday raised import duty on gold to 8 per cent as surging imports of precious metals pushed up the country's trade deficit to unsustainable levels.

The rupee had hit a record low of 57.32 against the greenback in late June last year.

The rupee, which closed at 56.7250/7350 on Wednesday, was trading at 56.85/86 against the dollar in afternoon trade today, after touching 57 a dollar in early trade on the inter-bank foreign exchange market.

It moved in a range of 56.89 per dollar and 57.00 per dollar during the morning trade today.

Traders reported heavy demand for dollar, especially from oil refiners, the largest buyers of the greenback in the market.

The rupee has lost over 150 paise against the dollar in the past eight days.

The rupee remained strong during December-February period of the 2012-13 financial year helped by an increase in portfolio capital inflows and various reform measures announced during the period.

However, it continued to drift fed by rating agency warnings of sovereign rating downgrade and rising physical demand for dollar.

A decline in growth rate to below 5 per cent levels and rising current account deficit, which hit 6.7 per cent of the country's GDP, also aided the rupee's decline.