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Indian rupee slumps to record low Indian rupee slumps to record low
(21 days later)
The Indian rupee slumped to a record low of less than 69 to the dollar on Wednesday – its worst performance since 1995 – on growing worries that foreign investors will continue to sell out of a country facing stiff economic challenges.The Indian rupee slumped to a record low of less than 69 to the dollar on Wednesday – its worst performance since 1995 – on growing worries that foreign investors will continue to sell out of a country facing stiff economic challenges.
The pummelling in markets sent the rupee reeling 3.7% to an all-time low of 68.85 for a time with the currency closing just a touch off that.The pummelling in markets sent the rupee reeling 3.7% to an all-time low of 68.85 for a time with the currency closing just a touch off that.
An assault on the psychologically significant 70 level appears imminent, as intervention from the central bank seen mid-morning gave the rupee only a brief respite.An assault on the psychologically significant 70 level appears imminent, as intervention from the central bank seen mid-morning gave the rupee only a brief respite.
Angelo Corbetta, head of Asia equity for Pioneer Investments in London said: "If steps are not taken to implement the reforms necessary to tackle the structural issues, the government will be left with the so-called '3D options': debt default, devaluation, deflation.Angelo Corbetta, head of Asia equity for Pioneer Investments in London said: "If steps are not taken to implement the reforms necessary to tackle the structural issues, the government will be left with the so-called '3D options': debt default, devaluation, deflation.
"In India, devaluation is happening now and deflation could be about to start."In India, devaluation is happening now and deflation could be about to start.
"The good news is that the debt default is highly unlikely.""The good news is that the debt default is highly unlikely."
Foreign investors have sold almost $1bn (£644m) of Indian shares in the eight sessions through Tuesday – a worrisome prospect given stocks had been India's one sturdy source of capital inflows in the first half of 2013.Foreign investors have sold almost $1bn (£644m) of Indian shares in the eight sessions through Tuesday – a worrisome prospect given stocks had been India's one sturdy source of capital inflows in the first half of 2013.
If more foreign investors throw in the towel, traders fear it will pitch the country into a vicious cycle in which the hit to confidence in turn slams shares and the currency even harder.If more foreign investors throw in the towel, traders fear it will pitch the country into a vicious cycle in which the hit to confidence in turn slams shares and the currency even harder.
Policymakers have consistently struggled in recent weeks to come up with steps that can convince markets they can stabilise the rupee and attract funds into the country despite extraordinary measures last month by the central bank to drain liquidity and action to curb gold imports, while attempting to cut India's huge oil import bill.Policymakers have consistently struggled in recent weeks to come up with steps that can convince markets they can stabilise the rupee and attract funds into the country despite extraordinary measures last month by the central bank to drain liquidity and action to curb gold imports, while attempting to cut India's huge oil import bill.
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