Exchange rate hits record low of Rs. 121.30/50

The US Dollar exchange rate hit a record low of Rs. 121.30/50 on Monday due to importer dollar demand, as the Central Bank stayed away in line with its new policy against intervening to defend a specific price, currency dealers said.

The rupee fell 1.1 per cent on Monday from Friday’s close of 119.90/120.00, as exporters stayed away from the market in anticipation of further depreciation, while some importers booked forwards to avoid losses if the rupee falls further. “You just can’t stop this depreciation unless the Central Bank raises interest rates further,” a currency dealer said on condition of anonymity.

The Central Bank raised policy rates for the first time since February 2007 to cool down the economy after the country saw a record high trade deficit and 16-year high credit growth.

Most dealers expect the currency to slide to around 125-130 a dollar by end of this year.