- Indian rupee falls 39 paise to 61.27, fails to hold initial gainsFM P. Chidambaram lays out new steps to aid Indian rupee but market isn't impressedAs Indian rupee plunges to all-time low, govt bans duty free imports of flat panel TVs by air travellersRupee in freefall, but Indians' travel plans soaring: Yatra survey
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 reforms to attract more long-term capital.
The rupee's plunge adds to worries about India's ability to fund a record high current account gap and whether Finance Minister P. Chidambaram will be able to meet his goal to pare the fiscal deficit to 4.8 percent of gross domestic product (GDP) this fiscal year.
Rating agency Moody's said that while the rupee depreciation was a new variable for the economy, the factors underpinning it have been incorporated in its investment grade rating for India.
India is at the lowest investment-grade sovereign rating.
"We believe that meeting the fiscal deficit target will be very challenging this year, given lower than anticipated growth holding back revenue growth and steep rupee depreciation raising the subsidy bill on imported goods," analyst Atsi Sheth said in an e-mailed reply to queries from Reuters.
Bond yields remained at pre-Lehman Brothers-crisis levels for a second straight day. The benchmark 10-year yield was up 20 basis points at 9.43 percent.