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MUMBAI The Indian rupee sank to a record low against the U.S. dollar Monday, firming expectations that authorities would take tougher action to protect this year's worst-performing Asian currency.
The rupee has come under renewed pressure in recent sessions amid rising concerns about the government's ability to implement economic reforms to attract foreign capital and resuscitate growth.
The dollar was quoted at 52.84 rupees late Monday in Asia, topping its previous record high of 52.725 rupees on Nov. 22. It was buoyed by a selloff in local stocks after domestic factory output contracted for the first time in more than two years as global risk appetite waned.
Authorities have recently taken steps to attract foreign capital portfolio inflows and made it easier for Indian firms to hedge their currency risks, but analysts now expect tougher measures.
"We could see measures like allowing oil importers to buy dollars directly from the RBI [to ease dollar liquidity] and restrictions on customer transactions," said Anindya Das Gupta, managing director at Barclays Capital.
In recent days, the Reserve Bank of India's tone on the rupee has become more aggressive, with the central bank saying it will use all possible measures, including strategic capital controls, if there is escalating risk of the rupee depreciating.
Last week, RBI Governor Duvvuri Subbarao said the central bank would make a "definitive statement" on the rupee's fall at its next rate-setting meeting Friday.
Monday, local stocks tumbled after government data showed India's industrial output in October contracted 5.1 % from a year earlier, after a 1.9% expansion in September. The Bombay Stock Exchange's Sensitive Index slid 2.1% to close at 15870.35.
The dollar has gained more than 18% against the rupee since March. Concerns over domestic inflation, slowing economic growth and a possible widening of the government's budget deficit have made the local unit particularly vulnerable to bad news emanating from the sovereign debt crisis in Europe.
The rupee's weakness has prompted calls for the government to push through economic reforms to attract foreign capital and stimulate economic growth. Yet a major reform that was on the cards allowing multi-brand foreign retailers into the country was shelved last week because of strong opposition to the move.
Analysts say local currency, bond and equity markets could be set for a tumultuous week, with November inflation data due Wednesday, followed by the RBI's rate-setting meeting Friday.
Indian Rupee Hits Record Low - WSJ.com
The rupee has come under renewed pressure in recent sessions amid rising concerns about the government's ability to implement economic reforms to attract foreign capital and resuscitate growth.
The dollar was quoted at 52.84 rupees late Monday in Asia, topping its previous record high of 52.725 rupees on Nov. 22. It was buoyed by a selloff in local stocks after domestic factory output contracted for the first time in more than two years as global risk appetite waned.
Authorities have recently taken steps to attract foreign capital portfolio inflows and made it easier for Indian firms to hedge their currency risks, but analysts now expect tougher measures.
"We could see measures like allowing oil importers to buy dollars directly from the RBI [to ease dollar liquidity] and restrictions on customer transactions," said Anindya Das Gupta, managing director at Barclays Capital.
In recent days, the Reserve Bank of India's tone on the rupee has become more aggressive, with the central bank saying it will use all possible measures, including strategic capital controls, if there is escalating risk of the rupee depreciating.
Last week, RBI Governor Duvvuri Subbarao said the central bank would make a "definitive statement" on the rupee's fall at its next rate-setting meeting Friday.
Monday, local stocks tumbled after government data showed India's industrial output in October contracted 5.1 % from a year earlier, after a 1.9% expansion in September. The Bombay Stock Exchange's Sensitive Index slid 2.1% to close at 15870.35.
The dollar has gained more than 18% against the rupee since March. Concerns over domestic inflation, slowing economic growth and a possible widening of the government's budget deficit have made the local unit particularly vulnerable to bad news emanating from the sovereign debt crisis in Europe.
The rupee's weakness has prompted calls for the government to push through economic reforms to attract foreign capital and stimulate economic growth. Yet a major reform that was on the cards allowing multi-brand foreign retailers into the country was shelved last week because of strong opposition to the move.
Analysts say local currency, bond and equity markets could be set for a tumultuous week, with November inflation data due Wednesday, followed by the RBI's rate-setting meeting Friday.
Indian Rupee Hits Record Low - WSJ.com
