MUMBAI: India’s rupee slumped to a new record low against the dollar yesterday, prompting suspected central bank intervention, amid fears that measures to stabilise the currency and kickstart the economy will not work.
Asia’s worst-performing currency this year slid to Rs64.13 to the dollar in morning trading, past its previous low of Rs63.22 the previous day.
The plunge was believed to have led the central bank to intervene twice in the foreign exchange market to sell dollars for rupees, dealers said.
The suspected intervention lifted the Indian unit slightly but it still ended the day at a new lifetime closing low of Rs63.25 to the dollar. The RBI does not confirm forex market interventions and says it intervenes only to prevent rupee volatility.
The troubles of the rupee, which has fallen nearly 17 percent against the dollar this year, has spilt over to the stock and bond markets.
Indian shares — which have lost seven percent in the past three trading days — slid as much as 1.83 percent in early trade yesterday to a low of 17,970.98 points before recovering to close down 0.34 percent at 18,246.04.
The yield on the 10-year benchmark bond hit 9.23 percent intraday, the highest for over five years, reflecting eroding investor appetite for Indian debt as worries about the economy and potential default mounted.
India’s weak trading sentiment was mirrored across key Asian stock markets, with investors jittery before Wednesday’s publication of the minutes of July’s US Federal Open Market Committee meeting.
Most emerging market currencies have been hit by expectations the Fed will scale back its stimulus sooner than expected, causing funds to flow back to the United States as its economy recovers.
AFP
