MUMBAI: India’s rupee slid to a new lifetime low against the dollar on Tuesday, tracking weakness in most other Asian currencies, as dealers continued to buy the greenback following robust US jobs data.
Growing concerns over slackening domestic growth and weak stock markets in India have also hurt the rupee, which began hitting lifetime lows on Monday for the first time in a year.
The partially-convertible Indian currency was at 58.59 to the dollar on Tuesday, slipping from Monday’s closing level of 58.15. The currency unit is well below its previous low of 57.32 rupees, hit on June 28 last year.
A scramble by oil and other importers to buy dollars to pay for imports in dollars has added pressure on the rupee, which depreciated seven percent against the US currency in May alone.
India’s central bank is yet to intervene in the market to support the beleaguered currency, foreign exchange dealers said, but they are hopeful of some guidance from the Reserve Bank of India (RBI) to improve sentiment.
“Some panic has set in. Until the RBI comes in, the rupee will continue to fall,” said Madan Sabnavis, chief economist with Care Ratings, a local credit ratings firm.
The RBI has a policy of not commenting on movements in the foreign exchange market and of intervening only to curb volatility.
Analysts say the central bank cannot intervene heavily to buttress the currency as it must retain enough foreign reserves for imports.
It currently only has sufficient reserves for seven months of imports — the lowest cover in 13 years.
The rupee’s fall is the latest blow to the stuttering growth story of Asia’s third largest economy, which has been beset by sharply slower growth, worsening public finances and political turmoil.
The weaker currency makes imports costlier, especially of foreign oil on which India heavily relies, and will stoke already high consumer inflation.