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28 Aug 2013
Indian Rupee 'hit and sunk'
FXstreet.com (Barcelona) - After reporting on the parabolic moves seen in the USD/INR in recent trading days, the hammering of the Indian Rupiah to fresh all-time lows continues, with further liquidation taking the exchange rate to a new record low of 67.20 before consolidating around 96.30.
The Bombay Stock Exchange's S&P BSE Sensex index has also been paying the consequence of the ongoing flight to safety towards Europe and the US, with the index falling 3.2% to 17968.08.
No quick fix for the Indian current account deficit
As reported by Nomura: "Current account deficit in India is high for various fundamental reasons, but nothing much is being done to address that" adding that "stronger policy responses are required." Gautam Trivedi, head of equities at Mumbai brokerage Religare Capital Markets Ltd, cited by the WSJ, said: "The government needs a quick fix for the CAD [current-account deficit] and there is no quick fix."
Cloudy outlook for Indian-denominated assets
India is one of the countries thought to extend the sanguinary moves observed in emerging countries, presently paying the consequences of having failed to control QE2-induced 'hot money' along with having to deal wit its own domestic issues. On August 20th, the RBI said it would intervene to calm bond yields, yet that has done little to stop the Indian Rupiah from sinking.
According to an article published by the Economist on Aug 24th, India is particularly vulnerable to the turbulence hitting emerging markets, noting: "Economic news has disappointed for two years, with growth falling to 4-5%, half the rate seen during the 2003-08 boom. It may fall further. Consumer-price inflation remains stubborn at 10%. A drive by Palaniappan Chidambaram, the finance minister, to push through a package of reforms and free big industrial projects from red tape has not worked. An election is due by May 2014, adding to uncertainty."
The Bombay Stock Exchange's S&P BSE Sensex index has also been paying the consequence of the ongoing flight to safety towards Europe and the US, with the index falling 3.2% to 17968.08.
No quick fix for the Indian current account deficit
As reported by Nomura: "Current account deficit in India is high for various fundamental reasons, but nothing much is being done to address that" adding that "stronger policy responses are required." Gautam Trivedi, head of equities at Mumbai brokerage Religare Capital Markets Ltd, cited by the WSJ, said: "The government needs a quick fix for the CAD [current-account deficit] and there is no quick fix."
Cloudy outlook for Indian-denominated assets
India is one of the countries thought to extend the sanguinary moves observed in emerging countries, presently paying the consequences of having failed to control QE2-induced 'hot money' along with having to deal wit its own domestic issues. On August 20th, the RBI said it would intervene to calm bond yields, yet that has done little to stop the Indian Rupiah from sinking.
According to an article published by the Economist on Aug 24th, India is particularly vulnerable to the turbulence hitting emerging markets, noting: "Economic news has disappointed for two years, with growth falling to 4-5%, half the rate seen during the 2003-08 boom. It may fall further. Consumer-price inflation remains stubborn at 10%. A drive by Palaniappan Chidambaram, the finance minister, to push through a package of reforms and free big industrial projects from red tape has not worked. An election is due by May 2014, adding to uncertainty."