Recent govt actions may only arrest rupee fall: DBS
Aug 28 2013 , Mumbai
"The string of recent policy action might only help to manage the pace of depreciation and limit volatility rather than reverse the course of the currency," it said in a note.
"Persistent verbal and actual intervention is also being tapped, but only serves to buy time," it said.
The note was written before the opening of the markets this morning, which have seen the currency touch a new high of 68.75 to the US Dollar, continuing the trend of hitting new highs in the last few trading sessions.
"Effort to effectively defend the currency is turning into a losing battle in this environment," it said.
The DBS note attributed the fall in Tuesday's session -- in which it touched a new low of 66.24 to the dollar -- to external triggers and "absence of domestic affirmative action".
On the external front, analysts blame the negative news flow emerging from Syria and the consequent push in crude oil prices, while on the domestic front, worries remain even though Finance Minister P Chidambaram has been continuously reiterating that the government will abide by the fiscal deficit target.
The government and the Reserve Bank have taken a series of steps to arrest the fall of the rupee, which have been one of the weakeast performers among all the Asian currencies.
The steps taken include limiting Indians' investments abroad, which attracted criticism of a return back to capital controls. With a view to curbing speculation in the currency, RBI has also taken unconventional measures like limiting banks' overnight borrowings.