The Rupee has notched yet another record low today and closed at 53.22 levels with intraday high of around 53.49. The last time, comparable lows were seen was in March 2009 where the local currency unit stopped just short of the 52 level. In the backdrop of considerable global turmoil, the Rupee has depreciated the most on an YTD basis.
All Asian economies except India have a current account surplus. Even though some of these economies might be running a capital account deficit, inflows on the current account help to bridge the gap. In October, the trade deficit had widened to a record USD 19.6 bn but improved slightly in November to USD 13.6 bn according to Ministry releases.
Indian currency has shown very high correlation with the Euro. India's usual comforts regarding relative insularity against external shocks is being challenged severely now. The fear of rating downgrades for Europe remains and the issue of bank capitalization remains a concern. If the Eurozone crisis does not witness a decisive solution soon, the Rupee may well see more downside in the near term.
