Rupee in a freefall; hits 56.08 as government goes into comatose

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Rupee hits 56.08 as government goes into comatose
Asia's worst performing currency, the Indian rupee dropped by a staggering 69 paise and hit 56.08 against the dollar at 3.45 pm IST. Analysts believe that the rupee without government intervention may now head for 58 levels, and may cause inflation to spike.

Today's trading saw renewed demand from importers, and with foreign currency bonds of some major corporates now due, there may be a fresh demand for dollars

The RBI measure to sell dollars in exporter accounts have failed to stop the rupee from falling. Earlier, the RBI had announced a hike in FCNR deposit rates to bring in more dollars. In December it had freed interest rates on NRE deposits on hopes that there would be renewed supply of dollars. However, analysts believe these are likely to only provide temporary respite, as the falling rupee has more to do with poor economic fundamentals.

If the RBI and government intervention does not help, the falling rupee might put severe pressure on inflation, especially if crude oil prices start climbing again. Government's inaction and any announcement has confused marketmen, who continue to remain bearish on the rupee.

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