Rupee closes below 57 to dollar.

MUMBAI: The rupee weakened further on Friday and flirted close to its all-time low level of 57.32 to a dollar, but dollar selling by exporters helped it to close above that level. Continuing its weakness seen since early May, the rupee fell to 57.12, but closed at 57.07, still 22 paise off its Thursday close at 56.85.

Since May, the rupee has lost 5.7%, making it one of the worst currencies in Asia. Dollar buying by oil importing companies , combined with speculative activity led to the weakness , dealers said.


The weakness of the rupee has made foreign travel more expensive and has also put additional burden on students who are studying abroad. A weak rupee helps exporters of software, pharma and jewellery , it is a burden on importers like capital goods, crude oil etc. Domestic prices of petrol and diesel are also impacted by a weak rupee.

The weakness of the rupee came on the back of talks that since the US economy was showing signs of recovery , there are talks that the US Federal Reserve may slow down its $85-billion per month bond buying programme , popularly called Quantitative Easing 3, or QE3, aimed at supporting the US economy. If it does, the dollar will strengthen and the rupee will weaken, market players said. Speculators are taking a bet on US Fed slowing down QE3 anytime now and hence bets are against the rupee, they said.

In a situation like these, some economists prefer RBI to talk up the rupee, but so far the central bank has been on the sidelines. On Friday, D Subbarao , RBI governor, warned that a high current account gap could feed into a weakening rupee and calibrating the monetary policy in such an environment was a challenge.

Source : timesofindia.indiatimes.com