Mumbai: The Indian rupee dropped by 58 paise to a lifetime low of Rs 52.73 per US dollar in early trade on Tuesday on persistent demand for the American currency from banks and importers amid sustained foreign capital outflows from the equity market.

READ MORE:Centre helpless to control Rupee decline

The rupee resumed lower at Rs 52.36/37 per dollar on the Interbank Foreign Exchange, as against its previous close of Rs 52.15/16 per dollar, before dropping further to Rs 52.73 per dollar.
    
The rupee was quoting at Rs 52.64/65 per dollar at 1030 hours.
    
The domestic currency hovered in a range between Rs 52.33 and Rs 52.73 per dollar during morning deals.     

Continued dollar demand from importers, mainly oil refiners, to meet month-end requirements amid expectations of a further rise in the dollar value overseas due to lingering European debt worries was responsible for the rupee's decline against the dollar, a forex dealer said.
    
Meanwhile, the BSE benchmark Sensex recovered by 109 points, or 0.69 percent, in early trade.

RBI, govt monitoring rupee movement: FinMin

   
With the Indian rupee falling to a historic low against the US dollar, the Finance Ministry on Tuesday said the Reserve Bank and the government are monitoring the situation.
    
"The RBI and government are monitoring the issue. While the movement of the rupee is determined by market forces, whenever there is excessive volatility, the RBI will intervene
as the situation warrants. RBI will take action as required," Finance Secretary R S Gujral told reporters on the sidelines of the 35th Head of National Drug Law Enforcement Agencies (HONLEA) meet here.
    
The rupee slid past Rs 52.50 per dollar in opening trade on Tuesday before dropping to the lowest level in history of Rs 52.73 per dollar on sustained demand for the US currency from banks and importers.
     
When asked what level the rupee exchange rate would be a concern, Gujral said that excessive depreciation of the rupee impacts India's import bill.
    
"Excessive depreciation of the rupee does impact our import bill. With the marginal decline in the crude price, which is close to USD 107 (per barrel), it obviously gets lost through the depreciation and definitely our import bill for fertilisers and others also gets impacted," he said.
    
The rupee is the fourth-most depreciated currency in the world and the most depreciated in the Asian continent.     

The RBI has attributed the movement to demand-supply factors and said it is happening globally. A weaker rupee is a matter of concern for India as it depends on imports for over 70 percent of its oil and gas requirements and the depreciation of the local currency has made imports more expensive. The depreciation of the rupee comes at a time when headline inflation has remained above the 9 percent-mark for 11 consecutive months.
    
Last week, RBI Deputy Governor Subir Gokarn had said the apex bank will intervene in the foreign exchange market only to arrest volatility.
    
The rupee has shed 16.5 percent since it hit a peak of Rs 43.85 in late July, 2011.
    
Gokarn had said the RBI would opt for open market operations to manage liquidity in the system only if there is stress and not to influence government bond yields.
    
Re fall disruptive, medium-term goals to guide action: RBI
  
Describing the sharp depreciation of the rupee as "disruptive", the Reserve Bank on Tuesday said any action to arrest the fall will be guided by medium-term considerations.
    
"We don't really have a target or a rate in mind. It's moving as per market dynamics. It (fall in the value of the rupee) is disruptive, there is no question. There (will be) impact on our import bill, particularly for energy. It's having an impact on companies and it is a problem," Reserve Bank Deputy Governor Subir Gokarn told reporters here.
    
The rupee has been depreciating for quite some time and fell to a historic low of Rs 52.73 per dollar in early trade on Tuesday.
    
On the possibility of action by the central bank to arrest the fall of the rupee, Gokarn said, "Any action we take now (will) have to take into account the fact that these actions might have consequences a little further down the road. So we have got to balance out actions with risks or a potential increase in vulnerability later on..."
    
"Actions have to be weighed in terms of their medium-term risks," he added.
    
The immediate impact of the fall in the value of rupee, he said, will be on the inflation rate, which has been hovering near the double-digit mark for several months.
    
"We should not be looking at only the short-term when we make these judgements. Every action that has been suggested... that has been debated, also has potentially adverse consequences down the road. So we have got to balance out those too." Although the RBI has been maintaining that the exchange rate should be market-determined, it is volatility that has been worrying the central bank.
    
"... Volatility is another thing. This is the sharpness and speed of the movement that is obviously creating some disruptions. We don't know where it is going to go, but it is something we need to watch out for," Gokarn said.

Agencies