Rupee plummets by 124 paise

Tracking the meltdown in global stock markets, the rupee today plunged by 124 paise to close at nearly two-and-a-half years low of 49.57/58 against the US dollar, posing worries to policy makers on inflation front as a weak domestic currency will make imports costlier.

Traders and bankers said the Reserve Bank of India intervened in the forex market to arrest the fall of rupee, but with little success. However, there was no official comment on RBI's intervention.

Finance Minister Pranab Mukherjee, meanwhile, in New York said RBI will intervene in the foreign exchange market "as and when the situation warrants". "Right now, there is no such situation," he said.

HDFC Bank Chief Economist Abheek Barua said it was suspected that RBI sold dollars today, going by the sudden gains the rupee made, but to me, it was not substantial enough to arrest the fall.

"If the local unit moves the way it is doing now, it will soon breach the technical level of 52 sooner than later. If RBI doest not intervene tomorrow, the situation will completely go out of hand," he added.

During intra-day, the rupee appreciated to 48.68 level.

Forex dealers said the rupee plummeted as importers and rushed to buy dollars amid its sharp rise in the overseas markets to a seven 7-month high against major rivals. The greenback is seen as a safe haven, especially at a time when risk aversion is sweeping through global financial markets.

The sharp fall in rupee comes at a time when the government is battling high inflation. A weak rupee will make imports of petroleum products costiler impacting prices. India imports imports 80% of the petroleum products requirement.

Decline in rupee's exchane value makes merchandise and software exporters happy as they will have better realisation.