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Skidding Rupee Hits Record Low Against Dollar .
By SHEFALI ANAND And SUDEEP JAIN
The Indian rupee tumbled to an all-time low against the dollar Tuesday as jitters about the economy were compounded by fear that the central bank's largely hands-off approach to the currency leaves it more room to fall.
At one point the dollar bought 52.72 rupees, easily surpassing the previous record of 52.1950 rupees, hit during the financial-crisis days of March 2009, according to Reserve Bank of India data. In midday New York trading Tuesday, the dollar was at 52.49 rupees, up from 51.236 late Monday.
The currency has been Asia's worst performer against the dollar this year, down more than 17%..
The rupee has been plagued by a combination of a lower risk appetite among global investors, spooked by the European debt crisis, and pessimism about the Indian economy. Growth expectations for the year ending March 31 are now at around 7% to 7.5%, compared with earlier government targets of 9% to 9.5%. And India continues to suffer from an inflation rate of around 10%, despite a 20-month campaign of interest-rate increases by the central bank.
With foreign investors staying away, the flow of dollars into the country has dried up in recent months. Foreign institutions have put a net $4.48 billion into Indian bonds and stocks this year, compared with $39.06 billion over the same period last year.
Meanwhile, the import bill, primarily for oil, has been rising, widening the trade deficit. For the April-June quarter, total imports were up 5.4% from the quarter before, and exports were down 1.2%. That has caused a jump in the current-account deficit, or the trade deficit plus interest payments and other transfers. The current-account deficit rose to $14.1 billion in the April-June quarter, more than twice its level of the previous quarter.
While other Asian countries' central banks typically intervene to bolster their currencies in times of weakness, the Reserve Bank of India has largely been absent.
"Very clearly, they haven't been protecting a level" for the rupee, said Anindya Das Gupta, managing director at Barclays Capital.
Increasingly concerned about a further fall in the currency, importers in recent days have started accumulating dollars, in turn weakening the rupee.
On Tuesday, Reserve Bank Deputy Governor Subir Gokarn said that while the bank doesn't have a target, it does view the rupee's sharp depreciation as a problem, since it could fuel inflation. Still, he didn't suggest aggressive intervention was imminent.
"Any action we take now, if any, has to take into account the fact that these actions might have consequences a little further down the road," he told reporters on the sidelines of a conference in Mumbai. "So we've got to balance out actions now with risks or a potential increase in vulnerability later on."
Finance Minister Pranab Mukherjee played down the effect that central-bank intervention could have, saying it might be different if local factors rather than global uncertainties were the main drivers of the rupee's decline. "Unless the international situation improves, there is a risk," he told reporters.
A senior government official told Dow Jones Newswires that the central bank is likely to take some steps to help state-run oil importers, which are hit hard by the falling rupee. Details weren't available as of late Tuesday.
Analysts say there are no quick solutions to the rupee's problems.
"The worst is not over," said Tamara Mast Henderson, a Singapore-based foreign-exchange strategist with ANZ Banking Group Ltd.
Abhrajit Gangopadhyay, Nupur Acharya and Mukesh Jagota contributed to this article.
By SHEFALI ANAND And SUDEEP JAIN
The Indian rupee tumbled to an all-time low against the dollar Tuesday as jitters about the economy were compounded by fear that the central bank's largely hands-off approach to the currency leaves it more room to fall.
At one point the dollar bought 52.72 rupees, easily surpassing the previous record of 52.1950 rupees, hit during the financial-crisis days of March 2009, according to Reserve Bank of India data. In midday New York trading Tuesday, the dollar was at 52.49 rupees, up from 51.236 late Monday.
The currency has been Asia's worst performer against the dollar this year, down more than 17%..
The rupee has been plagued by a combination of a lower risk appetite among global investors, spooked by the European debt crisis, and pessimism about the Indian economy. Growth expectations for the year ending March 31 are now at around 7% to 7.5%, compared with earlier government targets of 9% to 9.5%. And India continues to suffer from an inflation rate of around 10%, despite a 20-month campaign of interest-rate increases by the central bank.
With foreign investors staying away, the flow of dollars into the country has dried up in recent months. Foreign institutions have put a net $4.48 billion into Indian bonds and stocks this year, compared with $39.06 billion over the same period last year.
Meanwhile, the import bill, primarily for oil, has been rising, widening the trade deficit. For the April-June quarter, total imports were up 5.4% from the quarter before, and exports were down 1.2%. That has caused a jump in the current-account deficit, or the trade deficit plus interest payments and other transfers. The current-account deficit rose to $14.1 billion in the April-June quarter, more than twice its level of the previous quarter.
While other Asian countries' central banks typically intervene to bolster their currencies in times of weakness, the Reserve Bank of India has largely been absent.
"Very clearly, they haven't been protecting a level" for the rupee, said Anindya Das Gupta, managing director at Barclays Capital.
Increasingly concerned about a further fall in the currency, importers in recent days have started accumulating dollars, in turn weakening the rupee.
On Tuesday, Reserve Bank Deputy Governor Subir Gokarn said that while the bank doesn't have a target, it does view the rupee's sharp depreciation as a problem, since it could fuel inflation. Still, he didn't suggest aggressive intervention was imminent.
"Any action we take now, if any, has to take into account the fact that these actions might have consequences a little further down the road," he told reporters on the sidelines of a conference in Mumbai. "So we've got to balance out actions now with risks or a potential increase in vulnerability later on."
Finance Minister Pranab Mukherjee played down the effect that central-bank intervention could have, saying it might be different if local factors rather than global uncertainties were the main drivers of the rupee's decline. "Unless the international situation improves, there is a risk," he told reporters.
A senior government official told Dow Jones Newswires that the central bank is likely to take some steps to help state-run oil importers, which are hit hard by the falling rupee. Details weren't available as of late Tuesday.
Analysts say there are no quick solutions to the rupee's problems.
"The worst is not over," said Tamara Mast Henderson, a Singapore-based foreign-exchange strategist with ANZ Banking Group Ltd.
Abhrajit Gangopadhyay, Nupur Acharya and Mukesh Jagota contributed to this article.
