Rupee woes to deepen on external headwinds
MUMBAI: India’s rupee owes its tag of Asia’s worst-performing currency this year to the selloff sweeping emerging markets. There’s more pain in store from beyond its borders.
While foreign currency debt has zoomed, various external vulnerability indicators paint a rather mixed picture, according to the Reserve Bank of India’s annual report.
Indeed, data due as early as next week will probably show the nation’s current-account deficit widened in the June quarter to 2.6% of gross domestic product, the highest in 4½ years.
The widening in the gap is the weakest spot for Asia’s third-largest economy and one of the reasons why the rupee has been among the worst-hit in Asia this year.
The currency dropped to a record 71.7575 per dollar yesterday.
The sliding rupee and expectations of a faster-than-anticipated pace of monetary tightening by the US Fed saw more than US$3bil of foreign portfolio investments moving out in the April-June period.
Elevated oil prices and the trade tensions between the United States and China contributed to the outflows.
Analysts at Nomura Holdings Inc said India’s foreign exchange reserves at US$401bil are enough to cover eight months of imports. They are also at about 1.8 times India’s shortterm external debt, but down from nearly three times in 2008. — Bloomberg