Rupee heads for 54; little respite despite RBI measures

Business

oi-Sunil

By Sunil Fernandes

Published: Monday, May 14, 2012, 14:31 [IST]

The rupee dropped sharply once again, clearly heading for the 54 levels with the currency losing almost 22 paise to trade at 53.85 against the dollar at 2.35 PM IST. It is now likely to close at a historic low on sustained demand for the dollar.

The RBI took a number of measures last week including raising FCNR interest rates, while earlier it had free interest rates on NRE deposits to attract dollars and stem the slide in the rupee. However, this has not helped the rupee much, which continues to fall due to India's weakening economic fundamentals.

Sustained imports of gold and crude oil are responsible for the trade deficit and hence the current account deficit.

Fund flows from foreign institutional investors and rising trade and current account deficit, have led to the currency weakening.

Analysts believe that the rupee may hit an all time low and even slide further, if fund flows from FIIs turn negative.

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