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Why Indian rupee is in free-fall

Friday, 23 August 2013 - 3:55pm IST | Agency: ANI
According to the BBC, shares and currencies in emerging Asian economies have been hit by fears the United States may scale back its bond-buying programme

The Indian rupee has been in a free fall for several months, without showing any signs of recovery. India’s currency has lost nearly 16% against the US dollar since the beginning of this year. The currency has touched another all-time low of over 65.00 against the dollar.

According to the BBC, shares and currencies in emerging Asian economies have been hit by fears the United States may scale back its bond-buying programme. The programme has been used by the US Fed to boost liquidity in the market, a part of which has flowed into Asia, lifting assets price in recent years, the BBC reports.

India and Indonesia have been hurt by a slowdown in growth and their widening current account deficits, the report said. India’s growth rate has fallen to its lowest level in 10 years, while Indonesia saw its expansion rate dip to below six percent for the first time since 2010 during the April-to-June quarter.

There have been concerns that growth in these countries may dip further. There is also speculation that the US central bank could be scaling back its stimulus programmes, which the Fed first hinted at in June, has seen investors withdraw money from these economies. That has resulted in high volatility in both the currency and stock markets.

Against the US dollar, the Indonesian rupiah has fallen 18%, its lowest level since 2009 and the Philippine peso and Thai baht both 10%, since May, the report added.




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