Rupee falls to a new record low of 58.64 against dollar

MUMBAI: The rupee fell to a new record low of 58.64 versus the US Dollar tracking weakness in most other Asian currencies.

Rupee's continued weakness is stoking fears that foreign investors may pare positions, also clouding expectations for a rate cut by the Reserve Bank of India at its monetary policy review on June 17, dealers said

A sustained fall in the value of the rupee would make the going even harder for Asia's third-largest economy, which is growing at its slowest pace since 2003, as it would worsen the current account deficit and endanger the fall in inflation as imports become costlier. An immediate consequence, the market fears, is that RBI might not cut rates at its mid-quarter review meeting on June 17.

"A weakening rupee has adverse macro and micro consequences. The former, through increased inflation via costlier imports. The latter, through stress on repayment obligations of companies with external debt. The presumed positive effect on exports might not be strong enough to offset these," said Saugata Bhattacharaya, chief economist, Axis Bank.

The rupee is being battered following the dollar's rise against emerging market currencies. The dollar has strengthened on account of expectations that the US Federal Reserve would start scaling down its massive quantitative easing programme as the economy recovers.

The reason behind the rupee's recent weakness is the heavy selling of debt by foreign investors. FIIs have sold debt worth 15,402 crore in the Indian market since May 22. But inflows into equities have so far been positive.

At 09:18 a.m.; the 30-share index was at 19,382.82, down 58.25 points or 0.30 per cent. It touched a high of 19,397.98 and a low of 19,355.02 in trade today.