CHANDIGARH: Volatility in the foreign exchange market will remain until the euro zone crisis is resolved, Reserve Bank of India Governor D. Subbarao said on Friday. Subbarao said in a speech in the north-western city of Chandigarh that the central bank is watching the rupee, but could not say whether it will intervene in forex market directly. The rupee has skidded nearly 17 percent from a 2011 high reached in late July as risk-averse investors flee emerging markets, increasing the difficulties for a government already struggling with high inflation, slowing economic growth and a widening trade gap. The rupee touched an all-time low of 52.73 on Tuesday and state-run banks were spotted selling dollars in the market in recent sessions, sparking talk of RBI intervention. The rupee fell in afternoon trades on Friday as equities stayed negative and dollar demand from oil companies lingered. A fall in the euro also hurt sentiment. At 2:14 p.m., the partially convertible rupee was at 52.22/23 per dollar, weaker from Thursday's close of 52.065/075. The unit has so far moved in the 52.07-58.27 band. Traders said some comfort was seen from the government's decision to liberalise foreign investment in the $450 worth retail market, but big positions could be seen only after actual inflows materialise. The euro fell to a fresh seven-week low against the dollar on Friday and was set to weaken further as a lack of agreement between European leaders on how to tackle the spreading debt crisis in the euro zone continued to rattle nervy investors.
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