The rupee earlier breached the psychologically crucial level of Rs 50 per dollar on October 27, but later recovered during the day to close at 49.95 per dollar. Since January 1, the Indian currency has depreciated by 27% from Rs 39.42 per dollar. The rupee started depreciating since May this year, when the FIIs accelerated their sell-off of Indian equities. According to RBI data, in the past six-and-a-half months, rupee has depreciated by 25% from Rs 40 per dollar to below Rs 50 per dollar. The depreciation gained momentum since September, 2008, after the financial blowout in US and Europe. In the past two months, the Indian currency has lost 11% value—from Rs 45 to below Rs 50 per dollar. The RBI has been intervening in the foreign exchange market by selling dollars, but that has not been helped much in arresting the fall in the rupee’s value. One indication of the RBI’s extent of intervention can be gauged from the fall in foreign exchange reserves—from a peak level of $302 billion as on June 27 to $242 billion as on November 27 but a part of this drop could also be due to revaluation of the currencies in which the reserves are held. A senior treasury official at a PSU bank said that the RBI’s intervention has helped rupee to stabilize at the current level. But, as the sentiment is bad, RBI’s intervention with its limited amount of foreign currency reserve will have a limited impact. The main reason behind the rupee’s depreciation is the demand of dollar from foreign institutional investors, who have sold Indian stocks worth over $13 billion since January 2008. In October alone, they sold $ 3.84 billion. In addition, export earnings have been badly hit as the financial turmoil has started impacting sentiment in the real economy. The trade deficit widened to over $10 billion in September. On top of this, the banker said, exporters are not bringing their dollar earnings to the country. They are parking their foreign currency earnings abroad in the hope of bringing it in later when the rupee depreciates further. This would then allow them to earn more rupees then. At the same time, as dollar is appreciating, importers are advancing their purchase of foreign currency to meet their import requirements. Foreign exchange dealers also said there is strong dollar demand from oil refiners for making payments against crude imports.