MUMBAI: Bleeding for the ninth consecutive day, the rupee depreciated 16 paise to close to a fresh lifetime low of 96.86 against the US dollar on Wednesday as elevated global crude prices amid the West Asia crisis stoked inflation worries.
The currency is now the most undervalued globally in 12 years, and analysts are of the opinion that more weakening of the rupee will not boost exports as such gains will be offset by rising import costs.
Last May, the rupee had averaged at 85.50, marking a 11.9% year-on-year fall and close to 8% so far this year, making it the worst performing Asian currency in for the third year in a row.
Traders said the RBI is spending an estimated $1 billion a day on currency intervention. While dollar demand from importers is rising continuously, there is hardly any dollar sale by exporters, leading to the mismatch.
Meanwhile, the RBI has announced a $5-billion dollar-rupee buy-sell swap auction on May 26, to inject liquidity amid rising forex concerns.
The rupee’s sharp decline has emerged as one of the biggest economic warning signs for policymakers, investors and businesses, the decline largely driven by capital outflow, expensive oil, widening trade deficits and a surging US dollar.