22.11.11

Rupee at an all-time low !



The rupee hit a low of 52.16 against the US dollar on Monday, making imports, overseas travel and studies at foreign universities more expensive but cheered exporters and families depending on remittances. Based on Monday’s closing price, the rupee has never been cheaper against the dollar, although it had flirted with the 52.20 mark in March 2009 following the global financial crisis. But unlike then, when the slide halted as global markets recovered, this time round, foreign exchange dealers are betting on a further fall. There are projections of the currency falling to 55 against the greenback as economic fundamentals stay weak. If the doomsayers get it right, life isn’t going to be easy. The sharp fall evoked an almost immediate response from edible oil company Adani Wilmar, which raised prices, while those selling palm and other oil that are predominantly imported into India are expected to follow suit. So are white goods and phone makers who are considering a 2-10% increase in prices. A weakening rupee is also eating into the gains of falling international commodity prices with markets staying edgy due to fresh talk of recession and the inability of US lawmakers to push through a $1.2 trillion spending cut. Reflecting the nervousness, the BSE sensex slumped 425 points and fell below the 16,000 mark to close at 15,946. The last time the sensex closed below 16,000 was on October 5, 2011 after Moody’s downgraded SBI’s credit rating. Following Monday’s fall, the rupee has declined more than seven rupees against the dollar since August 1. A weaker rupee adds to inflation by pushing up cost of imports, particularly crude. Every weakening rupee adds Rs 8,000 crore to the crude bill. With the global economic forecast remaining bleak, foreign investors are pulling out of risky and emerging market assets and embracing safe haven options such as the dollar and US Treasury bonds.

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