India’s rupee plunged to a new record low against the US dollar yesterday and stocks slid 2.66 percent over fears that foreign capital could flow back to the US as its economy improves.
The rupee, one of Asia’s worst-performing currencies this year, hit a new low of 62 rupees to the greenback, slipping past its previous low of 61.80 rupees on Aug. 6.
The drop in value reflects fears that recent measures by the central bank may not be able to help the ailing currency, dealers said.
Indian shares also fell as much as 2.66 percent, or 515.19 points, to a day’s low of 18,852.40 points.
Engineering, auto and bank stocks fell sharply amid worries that a sooner-than-expected scale back of the US stimulus could trigger a foreign investor sell-off.
Overseas funds have pulled out a combined US$11.58 billion in equities and debt from India’s markets since June 1 over concerns about the weakening economy, regulatory data show.
“There is complete lack of faith in the markets. There are fears that the Reserve Bank of India measures may not help improve the rupee,” NSP Forex chief executive Param Sarma said.
India slapped new controls on foreign exchange outflows on Wednesday to try to stop the rupee’s fall.
At yesterday’s low the rupee had depreciated 13.2 percent compared with its value against the dollar this year.
The rupee’s woes come as New Delhi is struggling to turn around India’s once red-hot economy by pledging new steps to narrow the gaping current account deficit — the broadest measure of trade.
The economy grew at a decade-low 5 percent in the year to March. The depreciating rupee stokes inflation by raising the cost of all imports from crude oil to chemicals and pulses.
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