Rupee at all-time low; RBI move won't stop fall, says Pranab

With the rupee falling to a lifetime low, Finance Minister Pranab Mukherjee on Tuesday said that the Reserve Bank of India's intervention in the forex market will not arrest the slide as FIIs' pullout and global reasons were behind the depreciation.

The Indian rupee dropped by 58 paise to a lifetime low of Rs 52.73 per US dollar in early trade on Tuesday on persistent demand for the American currency from banks and importers amid sustained foreign capital outflows from the equity market.

The rupee resumed lower at Rs 52.36/37 per dollar on the Interbank Foreign Exchange, as against its previous close of Rs 52.15/16 per dollar, before dropping further to Rs 52.73 per dollar.

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The rupee was quoting at Rs 52.64/65 per dollar at 1030 hours.

The domestic currency hovered in a range between Rs 52.33 and Rs 52.73 per dollar during morning deals.

Continued dollar demand from importers, mainly oil refiners, to meet month-end requirements amid expectations of a further rise in the dollar value overseas due to lingering European debt worries was responsible for the rupee's decline against the dollar, a forex dealer said.

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"RBI intervention (in the forex market) will not help," the finance minister told reporters in New Delhi.

The minister said the Indian currency was depreciating because of the withdrawal of foreign institutional investors from the domestic equity market and global uncertainty was adding to the volatility.

The rupee has been weakening for quite some time and depreciated to a lifetime low of Rs 52.73 per US dollar in early trade on the Interbank Foreign Exchange on Tuesday amid sustained demand for the American currency from banks and importers.

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Dollar gains against other currencies overseas also put pressure on the Indian rupee.

RBI, govt monitoring rupee movement: FinMin

With the Indian rupee falling to a historic low against the US dollar, the finance ministry said the Reserve Bank and the government are monitoring the situation.

"The RBI and government are monitoring the issue. While the movement of the rupee is determined by market forces, whenever there is excessive volatility, the RBI will intervene as the situation warrants. RBI will take action as required," finance secretary R S Gujral said.

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When asked what level the rupee exchange rate would be a concern, Gujral said that excessive depreciation of the rupee impacts India's import bill.

"Excessive depreciation of the rupee does impact our import bill. With the marginal decline in the crude price, which is close to $107 (per barrel), it obviously gets lost through the depreciation and definitely our import bill for fertilisers and others also gets impacted," he said.

The rupee is the fourth-most depreciated currency in the world and the most depreciated in the Asian continent.

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The RBI has attributed the movement to demand-supply factors and said it is happening globally.

A weaker rupee is a matter of concern for India as it depends on imports for over 70 per cent of its oil and gas requirements and the depreciation of the local currency has made imports more expensive.

The depreciation of the rupee comes at a time when headline inflation has remained above the 9 per cent-mark for 11 consecutive months.

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Last week, RBI Deputy Governor Subir Gokarn had said the apex bank will intervene in the foreign exchange market only to arrest volatility.

The rupee has shed 16.5 per cent since it hit a peak of Rs 43.85 in late July, 2011.

Gokarn had said the RBI would opt for open market operations to manage liquidity in the system only if there is stress and not to influence government bond yields.