Rupee falls to record low against dollar in opening trades

MUMBAI: The rupee fell to a record low against the dollar for the third consecutive day on Friday as risk aversion made a strong comeback with Asian stocks showing deep cuts and euro falling to a four-month low.

The rupee was last trading at 54.67/68, breaching its previous all-time low of 54.60 hit on Thursday. It weakened as far as 54.71 in early trade.

The slide of the rupee to record lows could tear up balance sheets of many corporates that have borrowed overseas in the last few years, nullifying the cost advantage they enjoyed earlier.

The cost of repayment of overseas loans and bonds, estimated at more than $100 billion in the next few years, may climb substantially, with the rupee depreciating nearly 12% since its peak this year. A fall in the rupee's value forces the borrower to part with more of the Indian currency to pay up the same amount of US dollars.

While the number of companies accessing overseas loans has fallen since January, even if corporates want to raise funds abroad, they may have to settle for higher yields. "If the rupee does not stabilise soon, corporates would be affected," said Ajay Marwaha, head of trading at HDFC Bank. "We need to find sources of inflows. The RBI has done everything. Now, the government needs to make some structural changes."

The rupee has depreciated 6.3% this quarter and is 11.9% down from its February peak as overseas fund flows tapered off while import demand remained stubborn.

The widening current account deficit - the excess of imports over exports - is adding to pressure on the currency as the government remains indecisive on doing away with, or even reducing, subsidies on petroleum products. India imports three-fourths of its oil requirements.