The rupee slipped to below 100 against the British pound in the currency market on Tuesday. It also breached the 64 mark against the dollar,falling to 64.12 before recovering to close at 63.25.
However,India is not alone in the way currencies of emerging market economies have fared against the dollar since June 19,when US Fed chairman Ben Bernanke announced his intention to wind down easy money or quantitative easing. Emerging market currencies which are also running high current account deficits have been worst hit.
While the rupee has depreciated by 11.6 per cent against the dollar over the last 10 weeks,the Brazilian Real has fallen more sharply by 15.8 per cent. The other major losers include the Indonesian Rupiah and Malaysian Ringgit which have depreciated by 7 per cent and 6.1 per cent respectively in the same period.
Those who do not have such high deficits have occasionally managed to check the slide. Mexican Peso and South African Rand for instance fell sharply against the dollar in May and June,but have since recovered from their lows registered on June 21. Since June 3,the two have depreciated by 2.4 and 3.7 per cent respectively.
They have also been helped by their commodity exports holding up. Mexico exports crude while South Africa has benefited from its gold exports. Brazilian currency is under stress because the commodity prices are weak,when that improves it will bounce back, said Kishore Narne,head,commodity & currency,Motilal Oswal Financial Services.
Indias North Asian peers China and South Korea,which are strong exporting nations,have fared better with both recovering after an initial dip. Since June 3,both have appreciated by 0.01 and 0.07 per cent respectively against the US dollar.
Indian markets along with most other emerging markets have fallen since May largely on account of the Fed tapering fears. However,India has been hit hard on account of high current account deficit and a lower import cover (of only seven months), said a recent report by Bank of America Merrill Lynch.
We are really alarmed and the government needs to take steps that can have immediate impact. Unfortunately the market is not believing the governments announcements, said Jamal Mecklai of Mecklai Financial Services.