Rupee Dips To Record Low Of 54.42 Against Dollar

Mumbai: The Indian rupee slumped to a record low of 54.50 against the US dollar Wednesday with risk aversion in global markets adding to the pressure, even as Finance Minister Pranab Mukherjee hinted at new austerity measures and maintained that there was no need to panic.

This is the weakest level of rupee recorded so far. The earlier record low of 54.30 against a dollar was hit in mid-December last year.

The partially convertible rupee also hit a record closing low of 54.49 against a dollar. The rupee had closed at 53.78 against a dollar Tuesday.

Reacting on the development, the finance minister said slide in Indian stock markets and the currency was mainly because of the continued uncertainty in the Euro zone, particularly in Greece.

Mukherjee said the government would soon introduce some austerity measures to bring more fiscal discipline.

"I am going to put in some austerity measures. It is important to send a right signal," Mukherjee said while replying to a debate on the Union Budget in Rajya Sabha.

The Indian currency continued to slide despite a series of intervention by the Reserve Bank of India in the markets to control the fall.

The RBI last week asked exporters to convert at least 50 percent of their foreign exchange holdings in rupee. The move is estimated to lead conversion of around $3 billion of foreign currency, especially the US dollar, into Indian rupee.

The central bank has also spent over $20 billion in spot-market intervention since September 2011 to check the rupee slide.

The rupee has slumped almost 10 percent since March, the biggest fall among the major Asian currencies.

The Rupee has weakened due to rising concerns over the country’s current account and fiscal deficit. Slowdown in economic growth, high inflation and the perception of policy paralysis has also led to the weakness in the currency.

Continued sell-off by the foreign institutional investors led to almost two percent slump in the country’s benchmark indices.

The benchmark Sensex of the Bombay Stock Exchange slumped below 16,000 points mark. The Sensex closed 1.83 percent down at 16,030.09 points.

The wide-based Nifty of the National Stock Exchange closed 1.71 percent down at 4,858.25 points.

The latest industrial growth and inflation data has disappointed the market.

As per the data released by the Central Statistics Office last week, India’s industrial output shrank by 3.5 percent in March due to poor show of manufacturing and mining sectors. It is the first contraction in the factory output since October 2011, when it shrank by 4.7 percent.

Inflation moved up to 7.23 percent in April as compared to 6.89 percent in the previous month, mainly driven by a sharp increase in the prices of food items, according to data released early this week by the ministry of commerce and industry.