Most global currencies have weakened against the dollar over the past few days because the dollar is seen as a safe haven in times of distress. The euro has now lost 3% in three days.
The rupee continued its free fall Thursday, breaching the 54 mark against the dollar for the first time ever. It opened at 54.20 against the dollar, which is an all-time low. At 1049 hours, it traded at 54.26 against the dollar, falling 56 paise, or over 1 per cent.
This is the fourth straight day of declines for the currency. The rupee had closed at 53.71 to the dollar yesterday, a record low for the currency.
Most global currencies have weakened against the dollar over the past few days because the dollar is seen as a safe haven in times of distress. Overnight, the euro shed about a penny against the dollar to $1.29 and has now lost 3 percent in three days.
"The situation is serious. When the dollar is strengthening, there is not a whole lot Reserve Bank can do in terms of intervention... But, the RBI should prevent banks from holding long positions that will reduce the demand for dollars," Jamal Mecklai, CEO, Mecklai Financials said.
The rupee is weakening much faster than the Euro overseas. What that means is there is something else going on. That is what the RBI needs to try to arrest," he added.
Weakness in equity markets also contributed to the weakness today. The Sensex and Nifty traded with 1 per cent losses today.
Some traders expect the central bank to step into the market. The RBI governor and finance minister had met PM Manmohan Singh yesterday and discussed the causes of rupee weakness and possible policy measures. The central bank is slated to come out with a note on rupee, when it meets for its mid-quarterly review on Friday.
Source: NDTV
