The breaching of the crucial 45-level by the rupee against the US dollar for the first time in 21-month may augur well for exports in the country, but is likely to fuel inflation further, which is hovering over 12 per cent at present, experts feel.
"The huge demand for dollar and mismatch in supply have led to the continuous pressure on rupee, while foreign inflows have also slowed down this year. The depreciation could be a cause of concern for the inflation levels in the country as well although it may help the exporters," Punjab National Bank general manager Arun Kaul said.
The Indian rupee on Wednesday breached the crucial 45-level against the US currency for the first time after November 2006 following sustained appreciation in dollar against major currencies in overseas markets.
In quiet trade at the Interbank Foreign Exchange (forex) market this morning, the local currency resumed cheaper by nine paise at 44.92/94 a dollar from its last close of 44.83/84 a dollar and later drifted to 45.02/03 a dollar in late morning deals.
Besides, marketmen believe the uncertainty in the forex market is likely to continue for the coming days and the decline of rupee would obviously impact the imports of the country, with the main one being crude oil.
Arun Kejriwal, director of Kejriwal Research and Investment Services said that "the uncertainty in the forex market is likely to continue for the coming days.
However, the fast decline in the rupee against the dollar is a cause of concern as it will impact the imports in the country.
Forex dealers said the rupee crossed the psychological level for the first time since November 2006, largely due to stronger dollar overseas amid some dollar demand from oil refiners.
"After breaching the 45 a dollar mark, the rupee is likely to face strong resistance in the 45.5 to 46 a dollar range. And it is unlikely that it might drop further to 46 level...it is likely to consolidate at current levels for the next 10-15 days," brokerage firm SMC Global vice president Rajesh Jain said.
The Indian rupee which has seen appreciated to as much as 39 against the dollar last year, but the INR has again started depreciating since June this year.
Besides, the inflation has been easing slightly for the past two week and had fallen to 12.34 per cent for the week ended August 23.