The Indian Rupee is in free-fall as it posted yet another record low against the US Dollar. The currency’s rapid decline was exacerbated by concern that foreign investors will speed up the withdrawal of cash out of India as the US Federal Reserve prepares to trim its monetary easing programme.
The Rupee fell by 1.6% surpassing the 64 to the Dollar mark in early morning trading, adding to the already large 2.3% rout seen on Monday. The market is bracing itself for further losses.
The Indian Central Bank has tried in vain to halt the Rupee’s fall by introducing liquidity tightening measures aimed at making it harder to short the currency, a move that has hammered investor sentiment. The Rupee’s rout has been bolstered by growing concern over the state of the whole Indian economy with many investors saying that the country is not growing at a strong enough pace. India is suffering from its slowest growth rate in a decade and is burdened with a record current-account deficit.
“India’s problems are nowhere near resolution because New Delhi has not done anything- there is no focus on improving productivity, infrastructure or getting foreign direct investment back. It’s all about stemming the flow of currency and that is not the cause of the problem” said Pradeep Mohinani a credit analyst at Nomura.
The main cause for the Rupee and other emerging market currencies decline is the markets obsession over the US Federal Reserve’s possible tapering of its monetary easing programme. Whenever the markets think the Fed will announce the tapering emerging market currencies suffer as investors ditch the riskier assets and flock to the US Dollar.
With the Federal Reserve due to release the minutes of its July policy meeting on Wednesday we can expect the Rupee and other currency’s to decline further. If the Fed minutes do not suggest a tapering in September then the Rupee could recover some ground, but it doesn’t look likely.
Current Rupee (INR) Exchange Rates:
< Down > Up
The Pound Sterling/ Indian Rupee Exchange Rate is currently in the region of: 99.7475 >
The Euro/Indian Rupee Exchange Rate is currently in the region of: 84.9750 >
The US Dollar/Indian Rupee Exchange Rate is currently in the region of: 63.6088 >
The Australian Dollar/Indian Rupee Exchange Rate is currently in the region of: 57.6181 <
The New Zealand Dollar/Indian Rupee Exchange Rate is currently in the region of: 50.8590
Comments are closed.