India’s rupee has plunged more than 3.6 percent to a new record low against the US dollar amid deepening economic woes.
The rupee, one of Asia’s worst-performing currencies this year, breached 68.75 against the dollar in morning trade on Wednesday, after sliding three percent a day before.
The rupee has now fallen about 19 percent so far this year, by far the biggest decliner among the Asian currencies tracked by Reuters.
Foreign investors sold nearly $1 billion of Indian shares in the eight sessions through Tuesday – a worrisome prospect given stocks had been the country’s one sturdy source of capital inflows, although net purchases so far this year still total $12bn.
“It is just impossible to put any realistic value to the rupee any more,” said Uday Bhatt, a forex dealer with UCO Bank.
The need to attract foreign capital is critical for a country whose record high current account deficit is a key reason behind the rupee’s slump.
Yet policymakers have consistently struggled to come up with measures that can convince markets they can stabilise the currency and attract funds into the country.
Finance Minister P Chidambaram said on Tuesday the government would need to do more to revive an economy growing at the slowest in a decade and narrow a current account deficit that hit a record high of 4.8 percent of gross domestic product in the year that ended in March.
Those comments came after the government approval of infrastructure projects were overtrumped by concerns about the fiscal deficit after India’s lower house of parliament this week approved a 1.35 trillion rupees plan to provide cheap grain to the poor.
That failure is becoming an increasing source of tension for India at a time when fears of a possible US-led military strike against Syria are knocking down Asian markets, with the prospect that the Federal Reserve will end its period of cheap money as early as next month further raising concerns.
In its latest initiative, the government late on Tuesday proposed setting up a task force to look into currency swap agreements, a measure analysts said could bring some relief if carried out in time by reducing market demand for dollars or other major currencies.
Meanwhile, India’s main NSE index fell more than 2 percent while 10-year bonds yields rose to as high as 9.04 percent.
The benchmark Bombay Stock Exchange index also suffered a sell-off, sinking 2.66 percent.