The Indian rupee fell to a record low on Tuesday as declines in the domestic share market and weakness in other Asian currencies on fears of a global recession weighed on the unit despite recent measures by the central bank to boost dollar inflows.
The euro hovered close to a 20-year low near parity to the dollar amid concerns that an energy crisis could tip Europe into recession, while the U.S. Federal Reserve continues to aggressively tighten policy to curb inflation.
India's partially covertible rupee was trading at a record low of 79.60 per dollar at 0446 GMT versus its close of 79.4375 on Monday.
"We could see 80 levels on the USD/INR very soon. The only force holding it back from falling there is the RBI. But with most other Asian currenices falling, we should get there sooner rather than later," a senior trader at a private bank said.
Traders expect the Reserve Bank of India (RBI) to sell dollars via state-run banks to prevent runaway depreciation like it has in recent months.
The RBI took a slew of measures last week to boost foreign exchange inflows, including allowing overseas investors to buy short-term corporate debt and the opening of more government securities under the fully accessible route.
On Monday, the RBI introduced a mechanism for the settlement of trade in rupees, a measure expected to reduce the demand for foreign exchange and ease pressure on the currency.
Traders will watch the June consumer price inflation data due on Tuesday at 1200 GMT for near-term cues.
India's retail inflation likely held steady in June, but well above the RBI's tolerance limit for a sixth month as lower fuel and cooking oil prices offset higher services and food costs, a Reuters poll found.
Source Name:-Economic Times