Mumbai: The Indian rupee fell to an all-time low yesterday as oil refiners and other companies scrambled to buy dollars, with the currency looking increasingly vulnerable to a swelling current account deficit and fears over the global economy and Eurozone.
Exposure to short-term portfolio flows, a rising oil import bill and worsening government finances have heightened the risk for the rupee, Asia's worst-performing currency this year, and the outlook remains bearish.
The rupee has skidded nearly 17 per cent from a 2011 high reached in late July as risk-averse investors flee emerging markets, increasing the difficulties for a government already struggling with high inflation, slowing economic growth and a widening trade gap.
The failure of a US super committee to reach a deal on debt restructuring could trigger another major round of selling of emerging market and risky assets.
Limited options
At 3.15pm, the rupee was at 52.45/46 per dollar, after touching an all-time low of 52.73, and 0.6 per cent weaker than its previous close of 52.1550/1650.
"At this point in time, the options for the RBI and the government are really limited. The movement in the rupee is dictated more by macro fundamentals rather than speculation," said N. Bhanumurthy, economist with National Institute of Public Finance and Policy in New Delhi.
"I will not be surprised if the rupee breaches the 53 level and stays there for some time. I don't see a pullback till external macro conditions change."
The government has raised ownership limits on government and corporate bonds and is considering allowing international retail investors direct access to Indian stocks, which have slumped some 21 per cent so far this year.
Foreign funds sold more than $300 million (Dh1.10 billion) worth of shares over the last week, reducing the net inflows in 2011 to just under $400 million, sharply below record inflows of more than $29 billion seen in 2010.
