Rupee dives to 55 as RBI imposes further restrictions on Forex Dealers

India's troubled currency sees no light at the end of the tunnel as the currency continues to hit new bottoms. The INR was trading at record lows yesterday and closed at 55.03 (down 1.1%) against the greenback. Thus, the central bank has increased restrictions on Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Dealers holding positions greater than $100 million.

India has been witnessing difficulties as the BRIC nations economy is gradually shrinking, this has been having a direct impact on the rupee. It rapidly declined in December 2011 to 52.75.

The key factor that is putting pressure on the currency is the stress in India's balance of Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term (BoP), both on current account as well as capital account. India's current account deficit (CAD) has been on a widening trend over the last 4-5 quarters, breaching 4 per cent of GDP in December 2011, which is clearly a zone of high vulnerability.

India' central bank the RBI has taken several steps in order to check the sharp volatility in the INR, such as direct intervention in the FX market by selling USD, liberalizing the interest rate regime on the foreign currency deposits, putting limits on intra-day limits on positions taken by forex dealers.

The daily limit on positions has ben extended to a maximum of $100 million, a move to try to stabilise the currency.

Indian exporters are suffering due to the declining rupee however the downhill move of over 20 per cent since summer 2011 has meant the rupee is competitive on real effective exchange rate basis.