India’s rupee slumped nearly 4 percent to a fresh record low against the dollar yesterday as concerns about a US-led military strike against Syria compounded deepening domestic economic woes.
The rupee, one of Asia’s worst performing currency this year, has lost nearly a quarter of its value since the start of the year.
The Indian unit, which lost three percent on Tuesday, was down 2.46 percent at 67.87 rupees to the US dollar in afternoon trade after plunging 3.84 percent at one point to 68.74 rupees.
The rupee, which slid 3 percent against the US unit on Tuesday, has lost more than a fifth of its value against the greenback since the start of the year and more than 6 percent since the beginning of the week.
The benchmark Bombay Stock Exchange index also suffered a sell-off, dipping 2.89 percent at one point before recovering slightly to trade 0.51 percent lower. Some stocks were trading at multi-year lows.
Yesterday’s losses coincided with a global sell-off, with dealers running for cover at the prospect of turmoil in the oil-rich Middle East, while the cost of crude has also hit multi-month highs.
HDFC analyst Ashutosh Raina said the rupee was suffering from geopolitical tensions and domestic pressures.
“The flight to seek dollar safety is expected to intensify pressures on the rupee in the short term,” the analyst added.
However, other reasons for the rupee’s drop are home-made — failure to move fast enough on economic reform, a series of government corruption scandals, perceptions of policy paralysis and a record current account deficit, analysts say.
Other emerging market currencies have also been hit by foreign fund outflows with the US Federal Reserve expected to wind down its vast stimulus program as the US economy shows signs of recovery.
The Indonesian rupiah dived to 11,418 against the US dollar from 10,925 rupiah, while the greenback was at 44.79 Philippine pesos from 44.43 pesos.
In Turkey, lira fell further against the US dollar, despite assurances by the central bank and amid tension over Syria. The lira fell to 2.06 to the US dollar in initial trading, then rallied slightly to 2.0527, from 2.0382 at Tuesday’s close.
“The situation with Syria has been playing havoc with currency markets for the last few days,” said Kenichi Hirano, market adviser at Tachibana Securities.
“Any action by the US is not likely to be protracted. But wrangling over the national debt could go on for quite a while, as we’ve seen in the past,” he said.
The prospect of war in Syria is also weighing on Asian stock markets, where Tokyo tumbled 1.51 percent, or 203.91 points, to 13,338.46 and Sydney shed 1.05 percent, or 54.0 points, to close at 5,087.2.
Seoul clawed back some early losses to end flat, edging down 1.32 points to 1,884.52. Shanghai was off 0.11 percent, or 2.27 points, at 2,101.30 while in the afternoon Hong Kong was down 1.68 percent.
The possibility of more turmoil in the oil-rich region saw crude prices extend gains. New York’s main contract, West Texas Intermediate for delivery in October, jumped US$2.95 to US$111.96 a barrel in afternoon Asian trade.
Brent North Sea crude for October was up US$2.81 at US$117.17 after peaking at US$117.22.
Gold cost US$1,424.10 an ounce, near a three-month high, at 7am, up from US$1,410.75 late on Tuesday.