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The rupee could lose more ground, experts said on Monday, even as hopes arose that there could be a partial pullback from its low levels. The Head of Sales, Treasury and Markets at DBS Bank, Arvind Narayanan said, “It is difficult to predict a level as the current momentum is against the rupee. We think, 58.40 will be taken out first and then the exchange rate will aim for 59 levels.”

On Monday, the domestic currency closed at an all-time low of 58.16 against the dollar, down 110 paise, making imports even  costlier, more so as India imports an estimated 80 per cent of its fuel requirements. This is sure to fuel inflation, apart from worsening the already high current account deficit which stood at 6.7 per cent of the GDP in the October-December quarter, 2012-13. Narayanan attributed the rupee downslide to dollar outflows by foreign institutional investors (FIIs) from the debt market. “This is because US rates have gone higher recently and it is better for investors from a risk adjusted perspective to invest in US fixed income as compared to INR yields.”

Another analyst and AVP & Incharge- Metals, Energy & Currency Research at Religare Securities, Sugandha Sachdeva said that demand for dollars from importers is high. “The dollar demand, be it from gold importers or oil companies will not ebb irrespective of any regulation. Add to this, overseas investors, who had perhaps invested in Indian government bonds in 2008-09, are now selling their investments to book profits as yields have declined.” She said that the rupee is headed towards 59.50 to 60 levels in the near term, though there could be some resistance at the 58 level.

Chief Manager, Non-Agri Commodities and Currencies at Angel Commodities Broking, Reena Rohit said the depreciation of the rupee “highlights the micro-economic as well as macro-economic concerns”.

Referring to last week’s statement by RBI Governor D Subbarao that a weaker rupee should not be the criterion for exporters who should improve their business competitiveness to gain higher remittances, Rohit said, “The statement is a negative trigger and would cause further sentimental havoc in the domestic economy.”