Rupee weakens as heavy dollar demand continues

Crucial FSDC meet in afternoon to discuss exchange rate, CAD

The rupee weakened in early trades on Wednesday due to persistent dollar demand by importers. According to currency dealers, there is also dollar demand from foreign banks on behalf of Foreign Institutional Investors (FIIs) who are selling stocks.

At 10:10 am, the rupee was quoting at Rs 61.34 compared with previous close of Rs 60.80. It had opened at Rs 61.25.

The Reserve Bank of India (RBI) and the Finance Ministry will review the situation arising out of the weakening rupee and the widening current account deficit (CAD) at a meeting of the sub-committee of Financial Stability and Development Council (FSDC) today afternoon. The government and RBI is contemplating several steps to attract rapid debt flows from overseas which could provide support to the currency.

Yesterday, the rupee had touched an all-time low in intra-day trade at Rs 61.81. The recovery in the rupee was due to dollar sale by state-run banks on behalf of RBI. The announcement that chief economic advisor Raghuram Rajan was to be governor of RBI after D Subbarao’s tenure ended next month also helped the rupee as the street believed Rajan will take steps to boost growth of the economy.

The rupee is expected to weaken further and near the all-time-low level today unless state-run banks step in by way of dollar sale.