Ab Tak 56: Rupee crisis hits new corner

Moneycontrol Bureau

The rupee's precipitous fall down to 56 to a dollar has been effortless, with experts predicting a headlong dive to 60 levels before the carnage stops.  Despite a slew of rescue efforts initiated by the Reserve Bank of India in the past few days, latest one being the announcement last evening that it will buy government bonds worth Rs 12000 crore, the rupee continued with its downslide, hitting a fresh low of 56.04 at 13.39 hours on Wednesday. 
The currency opened at 55.68 against the dollar after closing at 55.39 per dollar the previous evening.
Battering of the domestic currency began months ago, but the acceleration in its decline was noticed in the last six sessions when it made new lows at break-neck speed. The frequency at which the domestic currency broke all-time low levels surpassed anything the country had witnessed ever. Nick Parsons of National Australian Bank, who tracks the Indian currency closely, predicted its butchering will continue all the way down to 70/USD. 
All efforts by the RBI to protect the rupee has come to a naught as oil importers, foreign institutional investors and corporates frantically reached for the dollar. There has been mumurings if the central bank was doing enough! Sanjay Mathur of RBS, like many others, said the onus of saving the rupee is on the government now. The situation can be addressed by stern and immediate policy action. But C Rangarajan, chief economic advisor to the Prime Minister warned that any special overseas bond sale backed by the government should not be aimed at meeting short-term capital flow needs and should be done only after investors' perception of the rupee improves. 
Meanwhile, the US dollar rose to its highest level since January against a basket of major currencies after Fitch cut Japan's sovereign rating to A+ from AA. This  led to a drop in the Japanese yen and aided dollar.
On Wedneday, the injury deepened with the rupee frequently testing the 56 levels. It battled around 56.95 and 55.98 for sometime before giving into the pressure to breach the psychological 56/dollar levels. 
jhini.phira@network18online.com Also Read: Will rupee retire at 60/$? Experts debate Nifty's next move