MUMBAI: The Indian rupee fell to a new low against the dollar on Friday, breaching the 57 rupee mark for the first time, as global uncertainty pushed investors to the safe-haven US currency.
The Indian unit, which has depreciated more than 10 per cent since the start of April, fell to a record low of 57.325 before clawing back to 57.24, compared with the previous record low of 56.55 a day earlier.
In a bid to curb the currency’s freefall, India’s oil secretary said the central bank had asked oil companies to buy half of their dollar demand from public sector banks.
The rupee has been one of the hardest-hit currencies in Asia, reflecting investor concerns about India’s economy, which is being buffeted by high inflation and slow growth.
The economy grew just 5.3 per cent in January to March, its slowest quarterly expansion in nine years.
The latest downward spiral in the rupee came after Moody’s on Thursday downgraded the credit ratings of 15 of the world’s largest financial institutions, including Goldman Sachs and Barclays, citing risk exposure and the Eurozone crisis.
“Risk appetite is reducing at a very fast pace,” said DK Joshi, chief economist with ratings agency Crisil.
The rupee trend “will reverse once things stabilise in advanced countries”, he said. “At these levels the Indian market will start looking quite attractive”.
The rupee also faced a string of unprecedented lows last month, highlighting the economic drift in the once-booming Asian giant, which is also suffering from troublesome fiscal and current account deficits and a stalled reform agenda.
New tax policies seen as hostile to foreign investment have added to the gloomy climate.
Ratings agency Standard & Poor’s warned this month that India could be the first of the Brics emerging economies – which also includes Brazil, Russia, China and South Africa – to lose its investment-grade debt classification unless it revived growth and rekindled its reform programme.
Fitch Ratings also downgraded India’s credit outlook from stable to negative on Monday, saying the country’s growth potential will deteriorate without a quickening of structural reforms.