As Finance Minister Pranab Mukherjee said yesterday that the Centre was not sitting idle and watching the situation, the market was expecting some steps from the government to control further damage to rupee.
At the Interbank Foreign Exchange (Forex) market, the domestic currency opened slightly lower at 54.45 a dollar from last weekend's close of 54.42 and immediately touched a high of 54.44.
However, it fell sharply at the fag-end of trading breaching the crucial 55-level and closed at 55.03, a fall of 61 paise or 1.12 per cent from its previous close.
Though rupee plunged to record low levels for the third day in a row, RBI was conspicuous by its absence in the forex market. Dealers, however, said RBI could intervene with policy measures when markets resume tomorrow.
"Rupee breaching Rs 55 is a bit of worry. However, we expect the government to come up with some measures...," said N S Venkatesh, Head of Treasury IDBI Bank.
Rupee has lost over 22 per cent in the last one and about 11 per cent since March this year. The pressure increased especially since mid-March, when the foreign funds started withdrawing from the Indian stock market.
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The foreign institutional investors have pulled out Rs 1109 crore in April and Rs 206 crore in May after pumping in net Rs 44,000 crore in January, February and March exerting pressure on the country's current account deficit.
Erosion in rupee value has meant increasing cost of imports, including crude oil. But for correction in the crude oil prices in the global markets, the situation would have been precarious. MORE