Indian rupee breaches 64-level vs US dollar before RBI steps in

Comments 0
Rupee fell to as much as 63.78 to dollar, breaching its previous low of 63.30. (AP) Rupee fell to as much as 63.78 to dollar, breaching its previous low of 63.30. (AP)
SummaryMarkets are bracing for further losses, with 1-month non-deliverable forward trading at 64.71.

The rupee slumped to a record low in early trade on Tuesday and bond yields hit another five-year high as Asia's third-largest economy bore the brunt of growing money flows out of emerging markets.

Cost of crashing currency: How a falling Indian rupee can hit costs, pay, jobs

The rupee slumped as much as 1.6 percent to 64.13 to the dollar, adding to its 2.3 percent rout on Monday, before traders said the RBI was seen stepping in to sell dollars.

Express Editorial: Credibility crunch

Markets are bracing for further losses, with 1-month non-deliverable forward trading at 64.71.

A spate of measures by the central bank and government has failed to halt the slide, with liquidity tightening measures aimed at making it harder to short the currency pushing up borrowing rates and battering corporate and investor sentiment.

Related: Nine steps India can take to prevent rupee slide

The BSE Sensex fell 1.2 percent to an 11-month low. JPMorgan downgraded Indian equities to "neutral" from "overweight", citing strain in the country's balance of payments, while Citi lowered its Sensex target to 18,900 from 20,800.

"India's problems are nowhere near resolution because New Delhi has not done anything - there is no focus on improving productivity, infrastructure or getting FDI (foreign direct investment) back," said Nomura credit analyst Pradeep Mohinani in Hong Kong.

"It's all about stemming the flow of currency and that is not the cause of the problem," he said.

Late on Monday, the Reserve Bank of India increased the foreign direct investment cap in asset reconstruction companies to 74 percent from 49 percent.

Earlier on Monday, India banned the duty-free import of flat-screen TVs from August 26.

The 1-month onshore forward rate for the rupee was at 64.47 while the offshore non-deliverable forward was at 64.71, an unusually wide gap that reflected bearish overseas bets against the partially convertible currency.

Emerging market currencies have been under growing pressure from outflows amid expectations the U.S. Federal Reserve will soon start to wind down its super-easy money policy, possibly as early as next month.

Indonesia's rupiah, Brazil's real and South Africa's rand have also been in retreat as investors eye those countries that are most vulnerable to an exodus of foreign capital.

WEAK GOVERNMENT, WEAK GROWTH

Prime Minister Manmohan Singh's weak coalition government, heading into national elections by next May, has been hamstrung from pushing through

Single Page Format
Ads by Google

More from BANKING & FINANCE

Reader´s Comments
| Post a Comment
Please Wait while comments are loading...