Rupee hits record low of 53.51 to US dollar

The rupee opened at an all-time low of 53.19 to the US dollar shedding 0.7 per cent over the previous close on Monday. Overall the rupee shed 1.2 per cent since yesterday’s close.

The finance minister said last week that subsidies would surge over Rs 1,00,000 crore. The cabinet is expected to meet later in the day on Tuesday and clear the Food Security Bill.

This is expected to cost the taxpayer another Rs 1,50,000 crore. The high government expenditure on food, fuel and fertilisers stretches the fiscal deficit and puts pressure on the currency.

This is because the government has to borrow money from Reserve Bank of India.

The rupee has already shed over 20 per cent since July 2011.

The fall in the index for industrial production in October 2011 by 5.1 per cent has hurt the sentiment on the rupee. Exports is a key demand driver for the manufacturing sector. Any fall in output indicates low demand for export of goods. To add to that the government said over the weekend that it overstated the export data by $9bn.

Other key issues that concern currency traders include the sharp rise in subsidies. A drastic decline in the value of the rupee hurts foreign institutional investor sentiment. It has adversely affected FII inflows. Analysts don't expect the central bank to step in to support the rupee.

"The dollar is strengthening against most emerging currencies. So, it's not only that INR is depreciation which is why calls for an RBI intervention is getting postponed," Rohit Srivastava, Fund Manager, Sharekhan said.

 The Indian currency closed at 53.23 per dollar on Tuesday, around 40 paise lower than the level its ended on Monday.