Rupee hits record low; on watch for RBI

Mumbai: The rupee hit a record low against the dollar for a second consecutive session on Friday to approach the psychological 57 mark, hurt by dollar demand from oil firms and gold importers, as well the broad risk-off sentiment.

Traders did not spot intervention from the Reserve Bank of India so far, but most expect the central bank to step up dollar sales if the rupee ventures close to the 57 mark.

The RBI was suspected to have sold dollars on Thursday, though the actions were described by traders as "mild".

"The $ is strong across the board. I think at the higher levels exporters are unwinding their positions partially," said Uday Bhatt, a forex dealer with state-run UCO Bank.

The partially convertible rupee was at 56.96/97 per dollar, after hitting a record low of 56.97, and down nearly 1.2 per cent from its Thursday's close of 56.30/31.

The rupee had hit its last record low at 56.55 just on Thursday.

The past couple of sessions have resembled developments in May, when the rupee tumbled to a string of record lows, as renewed global risk aversion exposed India's fiscal and economic challenges.

Slowing policy reforms by a government facing faltering economic growth as well as current account and budget deficits has added to the rupee declines.

The Sensex was down 0.5 per cent. The U.S. dollar was hovering near a one-week high against a basket of major currencies, after Moody's Investors Service downgraded 15 of the world's biggest banks.

"The broad risk aversion is hurting. There were bids from oil firms as oil prices are also lower while goldies also bought," said Vikas Babu Chittiprolu, a forex dealer with Andhra Bank.

Oil companies are the largest buyers of dollars in the domestic currency market as India imports nearly two-thirds of its oil needs. Brent crude was hovering around $90 a barrel, up slightly from an 18-month low hit on Thursday.

The one-month offshore non-deliverable forward contracts were quoted at 57.40 while the three-month was at 58.16, suggesting a bearish near-term outlook for the rupee.