The Rupee hit a lifetime low against the dollar as flow of capital out of the country accelerates. The RBI (central bank) has been selling record amounts of dollars to slow down INR's fall, but so far has been unable to do so.
Reuters: - Traders said the central bank likely sold $250-300 million dollars on Friday to rescue the Indian currency.
|INR per one dollar|
The authorities are looking for ways to stem the declines.
Bloomberg: Indian Finance Minister Pranab Mukherjee said the government and central bank will announce measures on June 25 to halt a slide in the rupee after the currency sank to a record low two days ago.Investors now lack the confidence that the RBI will be able to accomplish much, as the central bank tries to battle India's stagflation. "Take your money out first, ask questions later", one investor said.
The Economic Times: - Not much has changed in the last few months, India's high current account deficit, high fiscal deficit, slowing economy; rising inflation are factors that are hurting the local economic growth.Some speculate that India will launch government guaranteed deposit accounts and loosen foreign investment rules in order to attract capital. The hope is also that at some point property markets may become attractive to foreigners (in dollar terms) and capital will start returning. But so far that has not been the case. The cash settled forward (NDF) market for rupee is indicating expectations for the exchange rate to get worse - with another 2% depreciation over the next 3 months.