Indian central bank cuts in forex market

MUMBAI - Agence France-Presse

A woman buys vegetables by a Western Union hoarding at a market in Delhi. REUTERS photo

India’s central bank is suspected to have intervened in the foreign exchange markets yesterday after the rupee tumbled to a new all-time low against the dollar for the sixth successive trading day.

The partially-convertible Indian unit fell to 55.94 against the dollar, below its previous record low of 55.46 a day earlier, as demand for the US currency grew.

The Reserve Bank of India (RBI) is thought to have intervened at 55.79, which saw the rupee strengthening to 55.52, before it again sunk.

The bank has a policy of not commenting on movements in the forex market and any interventions.

Concerns over the eurozone debt crisis persist and domestic problems, including India’s widening trade and current account deficits and declining foreign fund inflows, have depressed the rupee, analysts say.

There has also been pressure from oil importers, who exchange rupees for dollars when they buy crude for energy-scarce India, which imports four-fifths of its crude oil needs.

“The rupee is witnessing its worst days,” said Abhishek Goenka, chief executive with India Forex, a consultancy firm.

“International issues are adding fuel to the fire by creating a risk aversion sentiment in the market and boosting the demand for safe havens.” The rupee has slipped nearly 10 percent since the start of the new financial year in April. It was Asia’s worst performing currency in 2011, losing more than 20 percent of its value against the dollar compared to the previous year.