Rupee dips to 65.56; Chidambaram says fall unwarranted

Mumbai  :  The Indian rupee slipped for the fifth straight session Thursday to below the psychological level of 65 against a dollar, even as the government tried to calm the markets saying it is considering more steps for the currency’s stability.

The partially-convertible rupee slumped to a new record low of 65.56 against a dollar at the inter-bank foreign exchange market in Mumbai, surpassing its previous record low of 64.54 touched Wednesday.

The currency recovered in the late trading and ended the day at 64.55 against a dollar, 44 paise weaker than its previous day’s close at 64.11.

The rupee has touched new lows for the fifth session in row. The currency touched new record closing as well as intra-day lows.

Finance Minister P. Chidambaram called for calm in the currency markets, saying there was no reason for such unwarranted pessimism and stability will soon return in the markets.

“There is no cause for panic … We are confident that the stability will return to the markets,” Chidambaram said at a media conference in New Delhi.

The finance minister said volatility in the currency market was unacceptable and the government was taking measures to improve the situation.

Chidambaram said rupee is undervalued and has overshot its reasonable limit. However, he said the government was not targeting any particular exchange rate for rupee.

“We are not targeting any particular level for the currency. We want a stable currency … rupee today is undervalued and has overshot,” he said.

The Indian currency was battered, tracing weakness in major Asian currencies after the US Federal Reserve indicated that it would start tapering stimulus soon and as early as next month.

Scaling back of stimulus would lead to further outflows of money from the capital markets putting further pressure on the currency.

Currencies of other emerging markets, including Indonesia, Malaysia and Thailand also hit multi-year lows on the US Federal Reserve move.

The Indian currency remains under pressure despite interventions from the central bank and the government to prop up the rupee.

The Reserve Bank of India (RBI) has taken a slew of measures in the recent weeks to bolster the currency. The central bank Tuesday announced measures to tighten cash conditions and support longer-dated debt.

The RBI has also simplified rules to attract money from Non-Resident Indians (NRIs) and portfolio investments like equities and debts.

Meanwhile, stock markets witnessed smart recovery after four straight session of loss. The 30-scrip Sensex of the Bombay Stock Exchange (BSE) rallied 407.03 points or 2.27 percent to 18,312.94 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) closed the day’s trade 105.90 points or two percent up at 5,408.45 points.

Photo  : AFP