The RBI on Tuesday hinted that it would reduce in a calibrated manner the measures it had taken to prevent the rupee from falling. This saw a sharp drop in the rupee on Tuesday and weak opening today.
Dealers worry that the Indian rupee would now easily takeout its earlier low of 61.21. Month end dollar demand from oil companies also accelerated the fall in the rupee.
Constant fund flows from foreign funds had in the last few years helped fund the huge current account deficit. However, with dollar inflows from foreign funds virtually drying, financing the current account deficit would pose a big worry for the government, pushing the rupee lower. To check movement of Indian rupee against major global currencies click