We’ve posted a few times on the crisis in the rupee and other emerging market currencies, most recently here.
The seemingly unstoppable slide since the Fed announced tapering intentions in May has continued today for the rupee ( USDINR up through 64) and stock makets ( down another 1% ) in Asia’s third largest economy.
India’s inability to protect it’s currency has naturally led to concerns that foreign investors, who hold more than 50 % of freely traded Indian shares, will start to pull out in large numbers thus adding to the problems.
Recent measures to protect the currency, such as restrictive capital controls and increasing the import duty on gold, have had the opposite effect as traders and investors view these as acts of desperation rather than deterrant.
The Reserve Bank of India has a real job on its hands when it next meets in September on interest rates to try and strike a balance between protection of currency and restriction of growth.
Critics, including many of our Indian readers, are lining up to express dissatisfaction with the government and central bank intervention thus far and demanding that new measures are needed if the fall-out isn’t to gather pace even further.
Worrying times for India, emerging markets and the knock-on effect for the global economy.
