The rupee was routed yesterday, as traders placed bets that the Indian currency would continue to slide in value against the US dollar.
It fell to 62.7 per dollar, a record low, as investors highlighted a potential increase in the outflow of foreign capital from emerging markets when the Federal Reserve tapers its monetary-stimulus programme this year. The rupee is now Asia’s worst-performing currency this year, having declined by 13 per cent against the dollar since the beginning of 2013.
Also affected by the currency sell-off yesterday were the Indonesian rupiah, the South African rand and the Brazilian real. All these emerging-market states have current-account deficits and rely on foreign capital flows to plug the domestic-expenditure gap.
The Indian current-account deficit jumped to 3.3 per cent of GDP in the second quarter of the year, up from 2.4 per cent in the previous three months.
The Indian stock market also fell yesterday, sliding 2 per cent to its lowest level in 11 months.