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Indian rupee continued to bleed for a second straight session, as the domestic currency hit fresh all-time low against the US dollar after falling 25 paise to 72.70 on Tuesday.The rupee had opened 15 paise higher at 72.30, however, fresh concerns over widening India’s current account deficit, persistent foreign fund outflows and strengthening dollar made the unit to reverse course in late afternoon trade.The domestic currency hit a low 72.74 and a high of 72.26 during the session today.The US dollar index, which compares strength of the US unit against a basket of six major global currencies, inched up by 0.10 per cent to 95.24 today.On Monday, the rupee had plunged 71 paise or 0.98 per cent to 72.45 on rising crude prices and strengthening dollar.“Despite verbal intervention by the policymakers, there has not been much respite in the currency and market’s one-way bet against the rupee has continued. The sharp rupee plunge has increased market chatters of possible interest rate defense or reintroduction of the FCNR deposit scheme and forex swap lines with OMCs,” said Madhavi Arora, Economist, FX & Rates- Edelweiss Securities.
The relentless slide in the rupee has analysts rushing to rework their forecasts. With the currency setting one record low after another, lenders including DBS Bank are now predicting it will slide to as weak as 75 per dollar, Bloomberg reported today.However, Former Reserve Bank of India Governor Raghuram Rajan has said that the rupee will not go in for a free fall, as the central bank is appropriately raising interest rate to control inflation.”It is very important that the RBI continues to signal as it has done so far on its concern about keeping inflation on track, about raising interest rate whenever appropriate, to fulfil its inflation objective … that gives investors confidence that rupee is not going to go in for free fall because ultimately inflation will be in control …,” Rajan said.Meanwhile, media reports have said that the Indian government has asked the RBI to bolster efforts to support the rupee, Asia’s worst-performing currency of the past month.
Read more: economictimes.indiatimes.com