Rupee and rupiah at record lows against US dollar
THE Indian rupee hit a record low as Asian stock, bond and currency markets took another big hit yesterday.
Striking 58.98 per dollar at its weakest, the rupee had plunged 3.25 per cent so far this week, notching record lows for two consecutive days.
This comes after a fresh spike in United States interest rates re-ignited concerns about capital flows from the region and forced investors to pare back their Asian portfolios.
Given the massive amounts of foreign money invested in Asia since 2009, as the Fed and other Western central banks pumped cash into the global financial system to revive their economies, there could be many more sharp sell-offs in the days to come, analysts said.
"We will see further pressure on currencies, I don't see that changing," said Mr Mitul Kotecha, global head of currency strategy at Credit Agricole.
The Indonesian rupiah fell beyond 10,000-per-dollar for the first time since September 2009.
While outflows from Asia would hurt most regional markets, analysts rank Indonesia and India, particularly the latter, as most vulnerable to a withdrawal of the Fed's monetary stimulus, as these two countries need foreign funding to bridge the gaps in their current accounts.
Others, such as China and South Korea, are relatively well-cushioned by their own savings and capital surpluses.
India's government, central bank and the securities-market regulator will take "warranted" action to stop the sharp fall in the rupee, the Finance Ministry's chief economic adviser, Mr Raghuram Rajan, said yesterday.