May 23 – The Indian rupee hit a record low for the sixth straight day on Wednesday, slumping to 56.18 against the dollar despite the Reserve Bank of India’s likely intervention earlier in the day in a mild attempt to prevent further falls.
The RBI is thought to have intervened at 55.79, which saw the rupee temporarily strengthen to 55.52 against the dollar before falling again, however India’s central bank has a policy of not commenting on movements in the forex market or any interventions.
Analysts believe India’s widening trade and current account deficits as well as declining foreign fund inflows are among the chief forces causing the rupee’s depreciation. The rupee, also weighed down by global risk aversion, is among several emerging market currencies which are depreciating against the dollar, according to the Economic Times.
The Indian currency has now fallen nearly 10 percent in the 2012-2013 financial year that only just begun in April. Over that same period, overseas funds have withdrawn a net US$292 million worth of Indian equities, pulling down local share prices by 9 percent.
Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. For more information, please contact email@example.com, visit www.dezshira.com, or download the firm’s brochure here.