Mumbai: The rupee hit a record low for the fourth straight session on Thursday as concerns over the domestic economy and risk aversion globally raised fears of more capital outflows from Asia's third largest economy.
At 12:51 PM, the rupee was at 54.2000/2050 per dollar, after hitting an all-time low of 54.30 in early trade.
The partially convertible currency is down nearly 20 percent from its July high, with the pace of decline gathering steam in recent days.
"It doesn't seem to have a circuit breaker and global environment for risk assets is likely to remain poor near term," said Sean Callow, senior currency strategist at Westpac Banking Corp in Sydney.
Offshore non-deliverable forwards were indicating further weakness, with the one-month rupee NDFs at around 54.64.
Callow said the rupee could test 55 in the short term.
Traders said software and diamond exporters were selling dollars, providing some temporary relief.
Vikas Babu, a trader at Andhra Bank, said the rupee could steady for a while as market players book profits after the currency's fall of more than 4 per cent this week.
The Reserve Bank of India, which has been largely absent from the market in recent days, was spotted intermittently selling dollars but traders said it was unlikely to intervene aggressively.
The RBI's hands-off approach has amplified the currency's weakness as exporters have hesitated to book dollar receivables while importers have been forced to cover short dollar positions.
Still, the central bank's policy review on Friday could offer some succour to the panicky foreign exchange market.
While markets do not expect an interest rate cut, analysts expect the central bank to signal a stronger resolve to intervene to hold up the beleaguered currency.
"We cannot rule out one more hike if the rupee extends its free-fall beyond 56 (to the dollar)," said J. Moses Harding, head of asset-liabilities committee at IndusInd Bank.
Overseas markets offered little comfort.
Asian shares fell into bear market territory for the year and commodities and the euro dropped on fears that Europe's debt crisis is still worsening, prompting investors to dump riskier assets in favour of the dollar and Treasuries.####
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