The Indian rupee has made history for a second day in a row. On Tuesday it dropped to a new low. It ended trade at 52.32 against the US dollar. Earlier in the day it had plunged to an even lower 52.73. Its closing price on Monday was 52.15. All in all, India’s currency has fallen nearly 17% since July end.
And the Reserve Bank has now become more discrete about its actions on the rupee. On Tuesday governor D. Subbarao said he would not comment on what RBI might be doing to shore up the rupee. He added that he expected things to improve once Europe’s debt crisis moves towards a solution. Last week, RBI’s deputy governor Subir Gokarn had said RBI would be cautious about using its forex reserves to strengthen the rupee.
And with the rupee falling in value, it’s virtually certain India won’t meet its fiscal deficit target this year. On Tuesday, finance minister Pranab Mukherjee said the government was going to overshoot the 4.6% target for this fiscal. Mukherjee also indicated that fiscal tightening was not necessarily the best remedy. That’s because it could lead to greater unemployment and slower growth. What’s more, Mukherjee added that the Reserve Bank needed to balance the twin priorities of controlling inflation and encouraging growth.
And finally, Indian markets broke an eight-day losing streak on Tuesday, thanks largely to short covering. The Sensex jumped 119 points to 16,065. And the Nifty climbed 34 to 4,812.