The rupee slumped to an all-time low of 54.46 against the dollar in afternoon trade on Wednesday, even as the Reserve Bank of India on Wednesday broke its silence over the falling rupee, saying it would do its "best possible to curb volatility".
The fall has been largely on account of a weakening euro, a global aversion for risk, India's large fiscal deficit, and continuing high imports. It last fell to a record low in mid-December 2011, when it hit 54.3 against the dollar.
The rupee's crash on Wednesday was heard in Parliament, too, with the Bharatiya Janata Party, the single largest opposition party, taking the government to task on the issue. The BJP demanded to know what steps the Congress party-led government would take to arrest the decline of the currency.
Earlier in the day, minutes before the rupee hit its record low around noon, RBI Deputy Governor KC Chakrabarty had said that the central bank was "closely observing the rupee's movement" but that it does not intervene to arrest the fall in the rupee.
The RBI has been selling dollars to stem the slide of the rupee but its efforts have been offset by bunched-up import demand. On Tuesday, the dealers said there was "massive" intervention from the central bank, likely in the range of $500 million. Earlier this month, the RBI also directed exporters to divest half of their dollar holdings. It has also raised the cap on foreign currency non-resident deposits in a bid to attract more dollar inflows.
On Tuesday, the rupee closed at 53.79.
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