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Indian rupee touches record low
India’s currency drops to 52.70 against the dollar. This year, it has had the worst performance among Asia’s top ten most-traded currencies. High inflation and lower growth explain the rupee’s decline.
New Delhi (AsiaNews/Agencies) – India’s currency fell to a record low 52.70 rupees against the US dollar this morning bringing its decline to 15 per cent this year. By closing time, it was up somewhat at 52.30. In 2011, the rupee has had the worst performance among Asia’s 10 most-traded currencies and this is raising costs for companies like Hindustan Unilever Ltd. (HUVR) and Maruti Suzuki India Ltd. (MSIL)
The country’s benchmark BSE India Sensitive Index is also down by 22 per cent as investors sell emerging market assets concerned that the US and Europe will struggle to curb deficits.
The loss in value could further stoke inflation, which has held above 9 percent for 11 consecutive months. It could also increase fuel subsidy costs in a nation that imports 80 per cent of its fuel.
Despite aggressive moves by the Reserve Bank of India to limit the damages, analysts believe the Indian currency will continue to drop.
“It is now very difficult to look for reversal in rupee depreciation when the Indian economy is struggling with high inflation, low growth,” said J. Moses Harding, executive vice president at IndusInd Bank Ltd. (IIB) in Mumbai.
“What will hurt more is that the depreciation has been so steep and sudden,” Maruti’s Chief Financial Officer Ajay Seth said. “Volatility in the rupee will be severe in the next three to six months,” he added.
The CIMB Investment Bank predicts the rupee could drop to 54 a dollar before March 2012.