Rupee continues to get cheaper, reaches 51.33 against dollar

The rupee continued its southward journey as it fell 42 paise on Friday against the dollar as foreign investors continued to pull out of the country as a solution to the euro zone crisis appeared remote.

The fall in the currency was further accentuated as traders squared off their positions on the last day of the week even though dollar sales by companies pulled it off a 32-month low hit in early trade.

The Indian currency closed at 51.33 against the greenback on Friday to register the worst weekly fall of 2.41 per cent in two months. According to the markets regulator, there were net foreign fund outflows of $31.92 million on Friday and $254 million this week from the Indian equity and debt markets. Both domestic equity markets fell around five per cent each this week.

“The rupee is in a bear grip as both global and local factors are not working in its favour,” said Moses Harding of IndusInd Bank. Market sentiments weakened after RBI deputy governor Subir Gokarn said yesterday the central bank was careful about using the foreign exchange reserves aggressively to protect depreciation of the rupee.

A lack of participation from exporters and consistent domestic dollar demand have led to further strengthening of the greenback. “Exporters are very cautious and don’t want to sell now,” said Sandeep Gonsalves, forex dealer and consultant at Mecklai & Mecklai.

The central bank had sold $845 million in September, after following a hands-off approach for nine months, data released last Friday showed.

Amid increasing fears the euro zone crisis may blow out of proportion, the rupee has become the worst performing currency in Asia. It has depreciated 16 per cent since August 2011. “The rupee will continue its weakening trend and the next pit stop can be seen only around the all-time low levels,” said Harding. The rupee had touched its all-time low of 51.97 in March 2009.

In order to attract fund inflows, the government has increased the foreign investment limit in corporate and government debt. “This, in turn, should help ease some pressure on the rupee, which has depreciated 12.5 per cent against the dollar year to date in the absence of any meaningful foreign exchange intervention by the RBI,” said Taimur Baig and Kaushik Das, economists at Deutsche Bank.