The Indian rupee touched another record low as foreign investors continued to sell off the country’s shares.
On Tuesday, the rupee fell to 80.0125 per dollar. The currency has been hit by foreign outflows of about $30 billion from the country’s equities so far this year – a record amount – and concerns over a worsening current account deficit amid higher oil and commodity prices.
India policymakers have sought to arrest the currency’s decline with a raft of measures — from intervention to raising duties on gold imports — with a weaker rupee adding to imported inflation pressures. Other emerging market currencies are also feeling the heat as a hawkish Federal Reserve lures capital toward the US.
According to a Bloomberg survey, the currency has depreciated 7% this year as India’s current account deficit – the biggest measure of external finance – likely rose to 2.9% of GDP in the fiscal year ending March 31, almost double the level of the previous year.
Governor Shaktikanta Das said earlier this month that India’s central bank is on the lookout for a gradual rise or depreciation in the currency and is intervening in all market sectors to contain volatility.
Strategists at Nomura Holdings Inc and Morgan Stanley continue bearish on the rupee, predicting that the currency may fall to $82 by September.
The Reserve Bank of India has about $600 billion in foreign exchange reserves, which it is deploying to protect the rupee. The authorities have increased duty on gold imports and increased duty on petroleum exports. The monetary authority has also announced measures to attract more foreign exchange inflows into the country and allow rupee settlement of the trade.
