Rupee plunges to record low as current account deficit widens to 5-yr high Noor Arora
The Indian rupee and bonds sunk after the current-account deficit widened to the most in five years, as an emerging-market rout raises investor scrutiny of countries with worsening balance of payments. The rupee tumbled as much as 1.2 per cent Monday, the most in a month, to a record low of 72.5587, leading declines among Asia’s emerging-market currencies. The benchmark 10-year bond yield gained 11 basis points to 8.14 per cent, while stocks also declined. Emerging markets have been roughed up in the past month as contagion fears start to spread following a meltdown in the currencies of Argentina and Turkey. India’s current-account gap widened in the June quarter to $15.8 billion, hurt by higher payments for oil, data released after market hours on Friday show. “Apart from the dollar strength that’s weighing on the EM currencies, concerns about financing a wider current-account deficit are also hurting the rupee,” said Paresh Nayar, the Mumbai-based head of currency and money markets at FirstRand Ltd. At these levels, it remains to be seen if the RBI would support the currency in a big way, he said.
ARTICLE SOURCE: BS