Indian rupee falls to fresh record low

The dollar was at INR55.03 late Monday in Asia, up from INR54.42 late Friday. It rose to a record high of INR55.05.A wave of global risk aversion sparked by the specter of Greeces possible disorderly exit from the euro zone had pushed Asian currencies lower in tumultuous trading sessions last week. The rupee was the hardest hit.While sentiment remains weak, a final statement from the meeting of the Group of Eight major economies affirming they want Greece to remain in the euro zone assuaged sentiment regionwide.Still, experts warn headlines from Europe will continue to dominate investment decisions.In coming weeks, all depends on the external environment, mostly Europe. If it deteriorates, there is nothing stopping the rupee from reaching 55-56 or beyond, Dariusz Kowalczyk, senior economist at Credit Agricole, said in a note.Investors are extremely bearish on the rupee, due to complicated and sometimes counterproductive regulatory changes and policy indecision that may last until elections in 2014. This has led Indian companies to short the rupee, which is already weighed by a large trade deficit, he notes.Only a sharp improvement of global risk appetite will take the currency back below 54. It is difficult to envisage the rupee below 50 in the next 12 months, Kowalczyk said.In the government debt market, bonds fell in a dull session, as traders awaited details on the next bond sale worth INR150 billion to be held Friday.The benchmark 8.79% 2021 bond ended at INR101.58, down from INR101.69 at Fridays close.Traders anticipate the government will announce issuance of a new 10-year benchmark bond as the residual maturity of the current one is less than 10 years now.The market hopes the Reserve Bank of India will continue its bond repurchase program to ease cash availability.With the global backdrop remaining weak, concerns about the rupee will remain. We think the RBI will likely sterilize its intervention in the currency market to ensure stable liquidity conditions, a Barclays note said.Barring buybacks, supply pressure on bonds will be acute over the next month or so, putting upward pressure on yields, the house said.