Indian Rupee Falls Through 50 to Record Low on Slump in Stocks
The Indian rupee opened trade on Friday at a record low of 50.15 per dollar weighed down by heavy losses in Asian stocks which raised worries of more outflows from the local share market. The rapid withdrawal of foreign investment from India's once-hot but now melting stock market is also increaisng the woes.
India's rupee fell through 50 against the dollar to a record low as stocks in the region slumped on increasing signs that global economies are headed for a recession.
The currency was poised for an 11th weekly loss before Reserve Bank of India Governor Duvvuri Subbarao announces the central bank's monetary policy statement at 11:15 a.m. local time. Policy makers unexpectedly cut interest rates this week for the first time since 2004. The rupee, which was made partly convertible in 1993, has lost 21 percent versus the dollar this year and is the second-worst performer in Asia after South Korea's won.
``We are facing a global meltdown and we can only wait to watch the bottom for the currency,'' said Paresh Nayar, chief foreign exchange and bond trader at Development Credit Bank Ltd. in Mumbai. ``Investors are likely to continue dumping Indian stocks.''
The depreciation in Indian rupees will hurt local companies that have taken out loans in dollars. The interest on those loans, which is valued in dollars, effectively becomes more expensive as the rupee weakens. Indian companies hold about $221 billion of such loans.
So far Reserve Bank of India, the Indian central bank, has not intervened to stem the slide. But if it continues to slide then an action may be warranted minimize volatility.