Rupee drops below 56 again; Fin Min measures provide little respite

The rupee breached the 56 mark once again, as the brief rally witnessed late last week seemed to give way to substantial demand for dollars once again. At 3 pm the rupee plunged below the 56.13 level, dropping by a substantial 36 paise.

The drop in the dollar came despite the finance ministry on Tuesday allowing qualified foreign investors to invest up to $1 billion in corporate debt bonds. This is amongst the most recent initiatives to shore up the sagging rupee, which earlier this month hit a low of 56.40 to the dollar.

The drop in the rupee can be attributed to the widening current account deficit and the inability of fund flows to finance the deficit. A risk averse global environment and the strengthening of the dollar against major currencies has compounded problems for the Indian rupee.

Month end dollar demand from oil importers has also played a part in today's fall of the rupee. Analysts expect the rupee to continue its downward momentum as global problems particularly in Greece and Spain increase.

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