Tumbling Indian rupee risks breaching 20 per dirham

As the rupee slid to its all-time low, the government tried to assuage sentiments on Tuesday, saying that the fall in exchange rate was because of external factors and was not a cause of concern.

The reason behind the fall in rupee was because of the drop in Turkish Lira, and the U.S. dollar gaining rapid strength amid fears that the economic crisis in Turkey could spread to other global economies.

Fears over a rise in global protectionist measures, along with a strong USA economy dragged Asia's "worst-performing currency of the year" to a fresh intraday low before recovering by a fraction at Rs69.98.

Reportedly, the rupee has lost 7.2 percent this year and remains one of the worst performing emerging market currencies.

Analysts say the high crude prices are squeezing the Indian currency, making it less appealing to investors.

"As currencies of other economies are also depreciating, intervention by the Reserve Bank of India, by selling dollars in the country, will not help much at this stage for stabilising the rupee", Garg told reporters. The rupee on Monday crashed by 110 paise, which is its biggest single-day fall in five years ending at a lifetime low of 69.93. Investors are turning to dollar as safe haven with Turkeys currency lira crisis continuing since the last week. The RBI has been intervening very selectively in the market.

After breaching the psychological mark of 70 per USA dollar, the rupee has staged a recovery of around 35 paise and trading near 69.77 level.

The corresponding rates were 69.4685 and 79.1876, yesterday.

Yesterday, the rupee had plunged by Rs 1.08, or 1.57 per cent, to a record low of 69.91 against the United States currency amid fears that Turkish currency turmoil could turn out into global financial crisis.

  • David Armstrong