Rupee Declines More as Stocks Tumble
The Indian rupee continued to fall against the U.S. dollar and the Japanese yen today as the Asian stock markets fell again, spurring the outflow of the capital from the emerging markets.
The India’s central bank allowed the domestic companies to attract more foreign loans yesterday, lifting the limit imposed last year to cool down the financial markets. That effort failed to dwell the confidence into the investors’ hearts and the rupee fell today for a seventh day.
The problem with the availability of the funds for the Indian companies isn’t unique and it can’t be solved by the one-sided decision to lift the limits. The global demand for liquidity greatly exceeds the quite limited supply.
The Reserve Bank of India raised the limit for the foreign borrowing to $500 million in one financial year, allowing repatriation of the funds if they weren’t invested into the capital markets or real estate sector.
USD/INR rose from 49.290 to 49.745 as of 8:24 GMT today. INR/JPY fell significantly today — from 1.9882 to 1.9694.
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