Rupee plunges to all-time low, RBI to curb forex volatility

The Indian rupee on Tuesday hit its all-time low of 52.73intra-day but closed off the lows at 52.29/30. RBI Governor D Subbarao saidthat the central bank will manage volatility in the exchange rate and expressedhope the rupee would recover once the European crisis is resolved.

The rupee on Tuesday fell to its all-time low against the USdollar on sustained demand for the US currency from banks and importers, mainlyoil refiners, amid signs of further capital outflows.

Later in the day, the rupee managed to recover some lostground amid speculations of Reserve Bank's intervention to arrest the slide.RBI's role in forex markets could not be ascertained.

It finally settled the day at 52.29/30, still down by 15paise from its previous close.

Meanwhile, Finance Minister Pranab Mukherjee said RBI'sintervention in the forex market will not arrest the slide as FIIs' pullout andglobal reasons were behind the depreciation.

PERSPECTIVE: Why is the rupee falling?

"RBI intervention (in the forex market) will nothelp," he told reporters.

Reserve Bank Governor D Subbarao while attributing the sharpdecline in rupee to external factors said the central bank has not yet decidedon intervening in the forex market to arrest the slide in the local currency.

"Our policy is that if the macro-economic situation isimpacted due to the exchange rate fluctuation or undue volatility we will haveto intervene. We are yet to decide whether to intervene or not at themoment," Subbarao said.

In seven straight sessions, the rupee has lost a total 217paise or 4.34 per cent.

At the Interbank Foreign Exchange (Forex) market, the localcurrency opened bearish at 52.36/37 immediately touched its life-time low of52.73.

Dealers said persistent capital outflows aided the rupeedowntrend as Foreign Institutional Investors (FIIs) pulled out $460.40 millionin five days since November 15.

- With inputs from IANS