New Delhi: Fast declining rupee is posing serious challenges for the government. Rising trade deficit is expected to increase current account deficit. This is considered to be the prime reason behind the rupee fall. Rupee has breached the psychological level of 54 on Tuesday. However, after the intervention from the Reserve Bank of India, rupee recovered to 53.79. 

In the early trade hours, as the rupee attained a level of 54.04, the RBI started to sell dollar in the exchange market which was successful in restricting further fall of rupee. This is record fall in the current year. Earlier on December 15, 2011, rupee fell to 54.32.

Since August last year, rupee is witnessing continuous fall and is causing serious threat for the economy. Balance of Payments (BoP) has been affected badly due to the fall. With rising imports and ailing exports, trade deficit has reached USD 180 billion. It is also affecting forex reserves of the RBI.  

Shrinking forex reserves is leaving RBI with limited options for checking the rupee fall. RBI is not in a position to make repeated intervention into the exchange market. Whereas, the domestic economic state and global economic slowdown is keeping rupee under constant pressure.

Forex advisors believes that the strengthening of dollar against all foreign currencies can further weaken the rupee. If the import continues to grow in the present manner then rupee can see further decline. Few experts are speculating rupee to reach a level of 55 in next three months.


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