Fresh Trouble For Rupee?

The terrorist attack in the US poses news pressures on the rupee. The currency has already been under pressure owing to the outgo by foreign institutional investors. This may deepen unless the Reserve Bank of India (RBI) is willing to lend an indirect helping hand (read: intervention through the state-run banks).

The Indian currency that reverted to Rs 47.4250 on Tuesday afternoon from the intra-day low of Rs 47.48, started weakening once again on Wednesday morning after the New York incident and touched Rs 47.50 till the nationalised banks started selling dollars to help the currency recover.

The RBI does not seem to be overtly worried about the slipping rupee as the fall has has been overdue because of a poor trade performance. Exports declined by 1.9 per cent till July compared to a rise of 27.5 per cent in the corresponding period of the last fiscal.

Though imports fell by 1.8 per cent during April-July this financial year, the drop was not enough to bring the real effective exchange rate (REER ) below the overvalued position.

Says Uday Mulgaokar, associate vice-president, Kotak Mahindra Capital Company,