The Indian rupee fell to near record lows against the dollar on Wednesday, forcing the central bank to intervene to stem further falls on a tough day for Asian currencies. The rupee fell to as low as 68.67 to the dollar, not far from a record low of 68.85 hit in August 2013 when India was struggling with its worst financial turmoil since the 1991 balance of payment crisis.
It was trading at 68.6100/6150 as of 0605 GMT, down nearly 0.4 percent from Tuesday's close of 68.3725/68.3825 and taking its losses so far this year to around 3.6 percent. In 2013 global markets were hit by fears of a "Fed taper" as the US central bank sought to reduce its massive policy easing. This time around the rupee is also responding to a worsening global environment, including uncertainty about low oil prices and continued worries about China's economy. Traders said they expect the rupee to soon test the record low, with one-month non-deliverable forwards already trading at 69.
Meanwhile, the one-month implied volatility of the currency touched a six-month high of 7.74 percent. It was 7.05 percent on Tuesday. But traders were hoping India's sturdier economic fundamentals than in 2013 and foreign exchange reserves of near a record $355 billion could help reduce some of the concerns, though much would depend on how the Reserve Bank of India (RBI) responds. "The rupee can go much weaker," said Ashtosh Raina, head of FX trading with HDFC Bank.