'Free-falling' Indian rupee hits new lows

India's central bank promised on Friday to use "all its available tools" to stabilise the rupee, which sank to a record low against the dollar for a third straight day amid turmoil in global markets.

The Indian unit fell to 54.91 against the dollar, below its previous low of 54.58 a day earlier, before clawing back to 54.4 in late afternoon trade.

Asian shares and currencies fell after Moody's downgraded 16 Spanish banks on Thursday, while poor US manufacturing data heightened concerns over the global economy.

The central bank "will use all its available tools to fulfil its objective of curbing volatility in the foreign-exchange market", the bank's deputy governor Subir Gokarn told reporters in the eastern Indian city of Kolkata.

"The central bank will not hesitate to take more steps to stem the falls in rupee, if needed," he said.

But analysts and traders expect the rupee to fall further in coming days with risk aversion hitting global markets and sentiment souring over India due to its gaping trade and current account deficits and slowing economy.

"The rupee is in a freefall. Unless the RBI (Reserve Bank of India) and the government take major steps to boost sentiment, there are more worries ahead," said Abhishek Goenka, chief executive of India Forex, a consultancy firm.

India's central bank is suspected to have intervened on Thursday to help prop up the rupee in one of more than a dozen recent occasions it has sold dollars to help slow the decline of the currency.

Last week, it announced new measures to support the local unit, ordering exporters and other foreign-exchange earners to convert half of their total foreign-exchange earnings kept in banks into rupees.

Finance Minister Pranab Mukherjee this week blamed the deteriorating international climate for the falls as international investors sell risky emerging market assets and retreat to safe havens.

Other emerging currencies from Indonesia to Brazil have also been hit.

Foreign investors have been turned off the country of 1.2 billion people due to recent regulatory moves by the government, which has stalled on a pro-growth reform agenda aimed at opening up the economy.

Overseas funds withdrew a net $133.44 million worth of Indian equities in the new financial year, which started April, pulling down local share prices seven percent in the same period.

The falling rupee is bad news for India's economy, pushing up import prices and aggravating inflation that is running at over seven percent, limiting the central bank's scope to roll back interest rates and spur the economy.

It will also further strain the government's budget because oil imports -- which are priced in dollars -- will become more expensive.

The central bank said recently it had spent more than $20 billion in spot-market intervention between September and the end of February. Analysts estimate a further $5 to $7 billion to have been pumped in since.

The rupee was Asia's worst performing currency in 2011, losing more than 20 percent of its value in the calendar year.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Philippines accuses China of turning water cannon on its fishing boats

    Filipino activists denounced China's coast guard on Tuesday for turning water cannon on Philippine fishing boats in disputed waters, near where hundreds of Filipino and American Marines landed on a beach in a mock assault. The presidential palace in Manila said China's coast guard used water cannon on Monday to drive away a group of Filipino fishermen at Scarborough Shoal, damaging some of their wooden boats. …

  • U.S. says if China used water cannons on Philippine boats, would be provocative'

    The U.S. State Department said on Tuesday that if reports that China used water cannon son Philippine fishing boats in disputed waters are accurate, it would be a provocative step. Filipino activists have accused China's coast guard of turning water cannons on civilian boats in the disputed area on Monday. …

  • Pacmania sweeps Philippines ahead of Mayweather clash
    Pacmania sweeps Philippines ahead of Mayweather clash

    Manny Pacquiao's face is on shirts, dolls and postage stamps, his life story is playing in movie houses and millions are getting ready to party as the Philippine boxing hero's "fight of the century" nears. Pacmania is sweeping the Southeast Asian nation of 100 million people ahead of the May 2 Las Vegas bout against unbeaten Floyd Mayweather to decide who is the best boxer of their generation. Of course, it's the fight of the century," Manila film producer Lucky Blanco told AFP. …

  • ‘Racist remark vs Pinays not reflective of HK sentiment’
    ‘Racist remark vs Pinays not reflective of HK sentiment’

    The Philippine consulate general in Hong Kong believes that the “racist” statement of legislator Regina Ip against Filipina domestic helpers in Hong Kong is not reflective of the general sentiments of the Hong Kong community. Hong Kong is home to more than 173,00 Filipinos working mostly as household service workers. “They have left their loved ones back home to earn a decent living taking care of Hong Kong families. This, in turn, has engendered positive impact on both the quality of life …

  • SWS: Gov’t rating sinks to record low
    SWS: Gov’t rating sinks to record low

    “The Aquino administration is firmly determined to carry on and complete priority programs in all five pillars of the Philippine development plan, to ensure that reforms will be sustained by strengthened public institutions, to tread the righteous path and ensure that good governance becomes the norm at all levels of government, and to sustain and make permanent the gains from the transformation of mindsets and institutions,” Coloma added. Lawmakers expressed belief yesterday that the Aquino …

  • ‘Pacmania’ sweeping the nation
    ‘Pacmania’ sweeping the nation

    Manny Pacquiao’s face is on shirts, dolls and postage stamps, his life story is playing in movie houses, and millions are getting ready to party as the Philippine boxing hero’s “fight of the century” nears. Pacmania is sweeping the nation of 100 million people ahead of the May 2 Las Vegas bout against unbeaten Floyd Mayweather Jr. to decide who is the best boxer of their generation. …

  • House committee to put Bangsamoro police under PNP
    House committee to put Bangsamoro police under PNP

    The House ad hoc committee on the proposed Bangsamoro Basic Law (BBL) will put police forces in the envisioned new autonomous Muslim region under the Philippine National Police (PNP), and not under the regional chief minister. “We will delete the provision in the draft BBL giving the chief minister operational, administrative and disciplinary control over police forces in the region,” Cagayan de Oro City Rep. Rufus Rodriguez, committee chairman, said in a television interview. He said under …

  • Phl to seek more US military aid
    Phl to seek more US military aid

    The Philippines said yesterday it would soon ask the United States for more military equipment and training to build its defenses, as it faces Chinese “aggressiveness” in disputed waters. As hundreds of Filipino and American Marines simulated an amphibious assault to reclaim territory from invaders during annual war games, Armed Forces chief Gen. Gregorio Pio Catapang said he was drafting a “wish list” for US aid. Catapang said the Philippines would ask for “equipment and training” when …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options