Rupee falls to all-time low, Sensex plummets

The rupee on Wednesday plunged against the dollar to a historic low of 54.56 before recovering slightly to 54.50 amid big concerns over the eurozone. In Parliament, the government announced that it would resort to "unpopular" austerity measures to deal with fiscal problems, but insisted there is no need to press the "panic button".

A nervous Dalal Street followed the currency, with the Sensex plunging to an intra-day low of under 16,000 points. The index closed at 16,030.09 points, 298.16 points down.

The rupee's fall came as global concern mounted over the increasing possibility of debt-stricken Greece exiting the euro, bolstering demand for dollars and curbing bids for emerging-market assets. With the global risk aversion adding pressure on a currency already under fire from the country's current account and fiscal deficits, the rupee opened sharply lower at 54.06, and fell below the previous all-time low of 54.30, recorded on December 15, 2011.

RBI Deputy Governor KC Chakrabarty said in Mumbai that the monetary authority wasn't looking to protect any rupee level, but only to arrest volatility. "We don't intervene to arrest the rupee's fall, we intervene only to arrest the volatility, you must understand the difference," he said.

A finance ministry official said, "The rupee is falling due to global factors. There is no need to panic. The fall might continue till there is a certainty about the eurozone recovery. The RBI is keeping a watch on it."

Dealers said the RBI intervened at various levels in the market today but its efforts proved futile.

"Eurozone worries continued to impact global equities. A possible exit of Greece is resulting in rise in risk aversion. Capital is moving from risk assets to safe assets like the US dollar, thereby resulting in the dollar rallying against global currencies. India has its own set of issues including a decelerating economic growth and stubbornly high inflation," said Sanjeev Zarbade, vice-president, Kotak Securities.

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