Rupee falls to a historic low below 72 a dollar

The rupee plummeted to a historic low of 72.12 a dollar in intraday trade as the domestic unit continued to fall for the seventh straight session.

The rupee weakened 0.5 per cent to 72.1050 against the dollar as of 12:50 pm. The rupee was quoted 37 paise lower at 72.12 against the US dollar in afternoon trade.

A general weakness of currencies across emerging market and limited intervention by the Reserve bank of India (RBI) also weighed on the falling rupee.

The falling rupee, in turn, pushed bond yields up with investors fearing the fallout of weaker currency on inflation in the economy.

Sustained foreign capital outflows and widening current account deficit in the wake of soaring crude oil prices are the main factors for the rupee’s continued fall. This was reflected in the BSE Sensex too, which entered the negative zone falling 61.11 points, or 0.16 per cent, to 37,957.20 points in afternoon trade.

Finance minister Arun Jaitley on Wednesday attributed the fall in the rupee to global factors and stressed that the domestic unit was better off compared to other currencies.

The markets were expecting RBI intervention to arrest the rupee’s fall but the central bank seemed less concerned and this seems to have pressured the market. Analysts, however, say market intervention would require massive amounts of foreign currency to feed a hungry forex market.

Government officials, on the other hand, are banking on a weaker rupee to push up exports and bringing down non-essential imports. While a falling rupee may imports costly, it need not push up exports either as only the rupee value of exports goes up with a falling rupee.

This attitude has only helped to push down the rupee further as traders saw it as a signal that the government and the RBI would not intervene to stem the fall in the rupee.

The rupee has now fallen nearly 11.5 per cent against the dollar so far this year and continues to be the worst performer in Asia.