The rupee on Friday hit a new low of 54.91 to the dollar in afternoon trade, hitting the third consecutive record low in three days, but recovered shortly to trade at 54.71.
The tumble came on increased capital outflows and strong demand from importers for the American currency. Traders said that apart from capital outflows by foreign funds, strengthening of the dollar against the euro, which plunged to a four-month low following renewed worries over deepening euro zone debt crisis, put pressure on the rupee.
Traders are now watching the 55 to the dollar level closely.
There has also not been any significant intervention from the Reserve Bank of India in the past two days. The central bank has made it clear that it will only step in to manage volatility but that the value of the rupee would have to be market-driven.
Markets, however, are still expecting about $2.5 billion-$3 billion inflows before the end of the month, and are ignoring the fall in oil prices for now.
Barclays Capital on Friday said it expects the spot rupee to hit 56 in one month and then subsequently rise only to 54 within three months.
BarCap cites 'high' sensitivity to global market sentiment, 'limited' appetite for the RBI intervention and 'weak' macro fundamentals, in a report dated May 17.
The rupee will gain to 48/dlr in one year, BarCap forecast.
BarCap's near-term rupee view is much more bearish than a Reuters poll this week, which shows consensus forecast at 53.41 by end of June.
On Thursday, the rupee had touched an intra-day record low of 54.60 before settling at Rs 54.47 against the US dollar.
Meanwhile, the BSE benchmark Sensex plunged to below the 16,000 mark but pulled back in the afternoon on Friday. (NDTV)
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