Going cheap: Indian rupee tumbles to 17.42 vs Dh1

There doesn’t seem to be an end to the Indian rupee woes, with the emerging market currency registering its worst drop in a decade yesterday, plunging by more than 3 per cent against the US dollar and dollar-pegged currencies such as the UAE dirham.

After closing last week at Rs16.78 against Dh1, the rupee plunged through the Rs17-mark yesterday and closed the day at Rs17.29 against Dh1.

Against the US dollar too, the rupee yesterday breached the key support level of Rs63 vs. $1 and closed the day at Rs63.50, marking its worst decline in more than 10 years.

Any hopes of a bounce-back today are fast receding with the rupee showing further weakness and breaching another milestone against the greenback, plunging below the Rs64-mark in early trade today.

The rupee fell to Rs64.001 vs. $1 and Rs17.42 vs. Dh1 at 8.10am UAE time (04:10 GMT) with most emerging market currencies seen shaky against the green-again greenback.

Concerns about the Indian government’s fiscal management prowess and intentions are spooking foreign investors, who are seen pulling out their investments from Indian equity and money markets. The benchmark BSE Sensex index is down almost 12 per cent in less than a month.

Analysts believe tomorrow, Wednesday, is a key day for the markets as minutes from the US Federal Reserve’s previous meeting will be made public on the day, which might offer clues to the seriousness of the Fed in initiating the tapering off of the fiscal stimulus programme in September.

More importantly, the minutes might also offer clues to the extent of the initial pullback of the $85bn quantitative easing programme, which has been a major factor buoying emerging market assets so far.

After yesterday’s tumble, the rupee was crowned Asia’s worst performing currency this year, and is now in contention with the South African rand and the Brazilian real for the title of the world’s worst performing currency in 2013.

As reported by Emirates 24|7 earlier today, the Indian government is trying to throw the kitchen sink at the plunging rupee, including tighter fiscal controls and punishing import duties. India yesterday banned duty-free import of flat-screen television sets by air travellers from next Monday (August 26), citing the declining Indian rupee., .

Until now, non-resident Indians and other airline passengers could carry one piece of flat TV (plasma/LED/LCD) for personal use, worth up to Rs35,000 (Dh2,100) as part of their baggage allowance, without incurring any customs duty on the same.

As per the new rules announced yesterday, passengers will have to pay a 35 per cent duty and other charges, officials said.

This is in addition to the 10 per cent gold and silver import duty that the country has imposed in a bid to stop its residents from bringing in precious metals by spending much-needed foreign exchange, as well as hiking fuel prices for five times in two months.

The Reserve Bank of India (the country’s central bank) and India’s finance ministry have been undertaking these steps to partially plug the country’s ballooning fiscal deficit, which stood at $43.57 billion for the quarter ended June 2013. However, until now these don’t seem to be having the desired effect, and a negative investor sentiment has continued to push the rupee to new lows on a regular basis.

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