Indias Rupee Tumbles to Six-Year Low in Worst Week Since 1997
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India"s rupee slid to a six-year low, completing its worst week
since 1997, as a global stocks rout prompted investors to seek safer bets than
currency reached a record low of 49.26 per dollar in intraday trading as the
Sensitive Index plunged as much as 9.6 percent. More than $8 trillion of market
value has been wiped out in stock markets worldwide this month on concern a
deepening financial crisis, triggered by home-loan defaults in the U.S., will
drive the world"s biggest economies into recession.
rupee is among the most vulnerable of Asian currencies to the global financial
stress because India has welcomed more external financing than many other
countries in the region,"" said Sebastien Barbe, a currency strategist in Hong
Kong at Calyon, the investment banking unit of France"s Credit Agricole SA.
fell 2.94 percent to 48.47 per dollar this week as of the 5 p.m. close in
Mumbai. That is the biggest weekly decline since November 1997. The currency
rounded off its ninth week of declines, the longest losing streak since
December 2005. Barbe said the rupee may sink to 50 by the end of the year.
based abroad sold Indian equities worth a record $10 billion more than they
bought this year, data released by the Securities and Exchange Board of India
show. Overseas investors bought local shares worth a $17.2 billion in 2007.
World Index of shares lost 3.7 percent, extending this week"s drop to 19
percent, the most on record dating back to 1970. Standard & Poor"s 500
Index futures slid 2.7 percent. Europe"s Dow Jones Stoxx 600 Index slumped 6.9
percent, and the MSCI Asia Pacific dropped 6.4 percent.
pared losses after the central bank announced measures to ease a cash crunch in
the local banking system, adding to speculation the monetary authority will buy
the local currency. An increase in cash in the banking system allows the
central bank to buy rupees without causing a fund shortage.
money-market measures announced by the central bank have intensified
speculation that authorities will intervene in the currency market to support
the exchange rate,"" said Sudarshan Bhatt, chief currency trader at state-owned
Corporation Bank in Mumbai.
Reserve Bank of India made the steepest cut since 2001 in the amount of cash
lenders need to set aside as reserves. The bank lowered the cash reserve ratio
to 7.5 percent from 9 percent effective Oct. 11. The measure will release 600
billion rupees ($12.2 billion) into the financial system, the bank said in a
statement in Mumbai.
addition, the government canceled an auction of 100 billion rupees of bonds
scheduled for today to ease pressure on the nation"s cash-strapped banking
Reserve Bank"s foreign-exchange reserves declined by a record $7.9 billion in
the week ended Oct. 3, the central bank said today. Reserves fell by more than
$32 billion from a record $316.2 billion reached in May, indicating the bank
also fell after a government report showed industrial production grew at the
factories, utilities and mines rose 1.3 percent in August from a year earlier
after a revised 7.4 percent gain in July, the Central Statistical Organization
said in New Delhi today. Economists surveyed estimated an increase of 6