Rupee falls to 57.08 to dollar, RBI intervention watched.

The Indian rupee, which opened marginally higher on Tuesday, fell below the 57-level against the US dollar for the third time. Traders said any RBI intervention will be closely watched if the rupee continues its downward trajectory towards its record low of 57.32 hit on Friday.

At 9:55, the rupee was at 57.06 to the dollar, 5 paise or 0.09 per cent lower than Monday's close of 57.01. It had earlier touched a day's high of 56.90 to the dollar.

The rupee had soared over one per cent on Monday in anticipation of strong measures from the RBI and government to boost the rupee and economy. However, it trimmed more than half its gains to end above the 57-mark after RBI announced that it would hike investment limits in government bonds, disappointing investors who had expected bolder measures (Read: RBI announces steps to boost rupee, economy)

The rupee had hit a new lifetime low of 57.33 to the dollar in afternoon trade on Friday after risk assets were hit by heightened concerns about the world economy. Broad gains in the dollar versus major currencies on the back of global risk aversion and weakness in domestic shares too weighed on the rupee. Dollar buying from oil firms and gold importers added to the downward pressure, traders said.

Also Read: Rupee fall - 10 industries that will be most affected

NEW MEASURES

The central bank announced a handful of measures on Monday that would allow companies to borrow more from overseas to pay back their high cost rupee loans. It has also allowed increased the limit on foreign investment in government bonds by $5 billion to $20 billion.(Read: Government, RBI announce steps to boost economy: 10 developments)

However, markets were disappointed as they were expecting bolder steps to curtail rupee depreciation and a slowing economy. ‘Much ado about nothing’ said a note by a foreign bank, to its clients soon after the announcements by the Reserve Bank of India. (Read Why)

The RBI, last week, had also written to oil companies to source 50 per cent of their dollar needs from state-owned banks in a bid to support the rupee.

TEMPORARY RELIEF

However, analysts said these sorts of measures would provide only stop-gap relief and that India needed to improve its economic fundamentals, including addressing its current account deficit, to bolster the rupee.

"The problem with the rupee is fundamental, and technical measures cannot be supportive over a longer period of time," said Sanjay Mathur, an economist with Royal Bank of Scotland in Singapore.

"But it is also important to note that all the India-centric factors for the fall in the rupee, like lack of reforms, has been priced in. Further weakness will be because of the global risk-averse sentiment," he said.

The rupee has been plagued by concerns about Indian economy too as credit rating agencies Fitch and S&P warned about a paralysis in policy making affecting the country. While GDP slowed to 5.3 per cent in the fourth quarter of FY12, inflation has been persistently over comfortable levels. However, Moody's Investors Service on Monday said it was maintaining a stable outlook for India's Baa3 rating as slowing growth and higher levels of inflation were already factored into the outlook.

The Indian rupee has now fallen over 25 per cent in the last one year and nearly 6 per cent in 2012.

Source : ndtv.com