India rupee skids past 65-mark against dollarAgence France-Presse . Mumbai
India’s rupee tumbled to a new record low against the dollar Thursday, hitting the symbolic 65 level, as economists urged the government to focus on reforms to boost confidence instead of quick-fix solutions.
The currency, which has hit record lows for five straight trading days, slumped to 65.56 to the dollar as uncertainty about the future of the US stimulus programme added to growing fears about the state of the Indian economy.
The rupee has lost about a fifth of its value this year and there are doubts over whether policymakers are in control of the situation, which analysts now routinely refer to as a crisis.
The rupee recovered marginally from its day’s low to end trading at 64.55 on Thursday,
India’s finance minister said Thursday that intense selling pressure on the rupee was exaggerated and that the currency market ‘panic’ was unnecessary.
‘The panic that has gripped the currency market is unwarranted,’ P Chidambaram told a press conference.
‘It is almost universally accepted that the rupee is undervalued and has overshot the reasonable and appropriate level,’ he said, describing the volatility in the currency market as ‘unacceptable’.
The rupee has lost about a fifth of its value this year and there are doubts over whether policymakers are in control of the situation.
Global ratings agency Fitch warned in a statement Thursday that India, which it rates BBB with a stable outlook, may see its credit ratings lowered if it does not halt the fall in investment.
‘Unless reforms related to growth and lowering the current account deficit are addressed, things will not improve,’ said economist Devendra Pant with India Ratings, part of the Fitch ratings group.
Investors are concerned that the US Federal Reserve will begin winding down its bond-buying scheme, which has helped fuel an investment splurge in Asia’s emerging markets.
India has a large current account deficit which must be funded with foreign capital and the country is seen as one of the most vulnerable among emerging markets whose currencies are under pressure globally.
Pant said the government needed to find ways of boosting foreign direct investment, which plunged to $36.8 billion last year from $46.5 billion the previous year.
Since June 1 — after the US Fed signalled a tapering of its stimulus — overseas funds have pulled out nearly $12 billion from India’s stock and debt markets.
The Reserve Bank of India and the government have been trying to stabilise the rupee for months by announcing measures such as hiking short-term interest rates and imposing capital controls.
But the measures have failed to halt the plummet and this week the central bank changed tack, announcing it would inject 80 billion rupees ($1.26 billion) into the banking system by buying back long-term government bonds.
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India’s rupee tumbled to a new record low against the dollar Thursday, hitting the symbolic 65 level, as economists urged the government to focus on reforms to boost confidence instead of quick-fix solutions. The currency, which has hit record lows for five straight trading days, slumped to 65.56 to the dollar as uncertainty... Full story
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