Desperate rupee hits a record low of 58 a dollar

The rupee lost more than 90 paise against the mighty dollar at 57.95/96 a dollar, after hitting a lifetime low of 58.00 against the greenback in the interbank foreign exchange market today as the Indian currency continued its downward trend for the second consecutive week.

The rupee was hammered by rising dollar demand from importers and banks even as the US currency continued its firm trend in overseas markets. The rupee, which has no moorings, now looks set to touch the 60 mark against the dollar.

The rupee resumed trading at the interbank foreign exchange market at 57.18 against its previous close (Friday's) of 57.06 against the greenback and continued to drop to hit an all-time low of 58.00 per dollar.

This is the new life-time low since the rupee touched 57.32 a dollar in end-June last year.

The rupee, however, pared some losses and was trading at 57.60 per dollar at 1100hrs, still showing a loss of 54 paise from its Friday's closing level of 57.06 a dollar.

The rupee is in the grip of a vicious cycle of India's record internal and external debt that have reached unsustainable levels.

The rising current account deficit and record fiscal deficit have combined to complicate the task for policy makers looking to revive an economy that grew at less than 5.0 per cent in the 2012-13 fiscal, its slowest in a decade.

The Reserve Bank of India (RBI) has so far refused to intervene in a market that would have sucked away all the foreign exchange resources at the disposal of the central bank, in an effective intervention.

The demand for dollar from importers and banks seems insatiable with the country's ever-increasing imports and the continuing cycles of FII churning of the stock market.

As things stand, the Indian economy is heavily dependent on foreign institutional investors and finance ministry officials expect the rupee to reach levels near 60 a dollar as capital outflows are likely to continue for next 10-15 days.