New Delhi, 16 May 2012

The rupee fell to new record low of 54.56 to the dollar before closing slightly better at 54.50 despite RBI’s intervention, raising widespread concerns about the health of the economy.

Earlier in the day, the currency recovered to 54.24/25 against the greenback compared to the 54.46 record low hit earlier in session, as stocks pared some losses and the euro posted a modest recovery.

Forex dealers attributed the fall to strong capital outflows in tune with the fall in local as well as global stocks where investors are increasingly avoiding riskier assets and moving to the new safe haven – the US dollar.

At the Interbank Foreign Exchange, the domestic unit opened sharply lower at 54.06 and mostly remained bearish. Intra-day it plunged to all time low of 54.56, surpassing the previous all-time low of 54.30 recorded in December last year.

Allaying fears, the Finance Ministry said there was no need to panic. “Rupee is falling due to global factors. There is no need to panic. The fall might continue till there is a certainty about the eurozone recovery. RBI is keeping a watch on it,” a finance ministry official said.

Dealers said RBI intervened at various levels in the market today but its efforts proved futile.

Meanwhile, RBI Deputy Governor K C Chakrabarty today said the RBI intervenes in the forex market only to curb volatility and not the slide. “We don’t intervene to arrest the rupee fall, we intervene only to arrest the volatility, you must understand the difference,” he said.

As the rupee touched a record low, Opposition questioned the government in the Lok Sabha on the steps being taken to tackle the situation. “The crisis in our economy is growing. Are we heading towards 1991?” senior BJP leader Murli Manohar Joshi said during the Zero Hour.