The rupee breached the Rs 55 mark to the US dollar amid speculation a state-run company was buying greenback to repay overseas loans, and because of demand for oil imports.

The central bank said capital inflows will determine the direction of the rupee and stepped in to arrest volatility in currency movement. 

The Reserve Bank on Monday excluded banks' net overnight open positions from currency futures and options segment. It also said foreign exchange future and options positions cannot be offset against OTC trades. 

RBI capped the position limit in the exchanges for trading currency F&O at $100 million or 15% of the OTC market. As the risk of rupee further depreciating remains, RBI has also allowed banks to use funds from FCNR deposits for granting loans to domestic borrowers to meet working capital needs to attract overseas money.

The rupee tumbled 1.1% to Rs 55.03 per dollar, a new low in a continuous slide for weeks that has made it the worst performer in the region. 

"Demand from oil has been strong, particularly today (Monday), and the capital flows are not matching that," said Subir Gokarn, deputy governor at the Reserve Bank of India. "Ultimately, capital flows are going to be the main determinant of how the currency behaves." 

All other currencies are also weakening against the US dollar, but the rupee is hobbled by the fact that it is the worst among the BRICS nations in wrecked finances with high fiscal deficit and record current account deficit, which is the excess of imports over exports. It has lost about a quarter of its value since July last. 

There was an outflow of $300 million due to a state-run power company that triggered the stop losses for many, said a dealer who did not want to be identified. When there is no depth in the market, such one-time demand would also push up the rupee, he said. Its intraday record low was Rs. 55.05. (Economic Times)