The Indian rupee extended its free fall against the dollar on Friday, moving past the 57.0/dollar mark for the first time as lingering worries over the global growth outlook and fragile domestic economic situation increased safe-haven flows into the latter.
The rupee reached as low as 57.3350 against the dollar, down almost 1.9 percent from yesterday's closing quote of 56.2250. A slew of disappointing U.S. economic data overnight and the rating downgrade of fifteen major international banks by ratings agency Moody's Investors Service also added pressure on emerging market assets.
Increasing dollar demand from importers and capital outflows also diminished the value of the domestic unit to its worst levels in history. The domestic economy grew just 5.3 percent in the three months through March, marking the least progress in nine years.
International rating agencies Fitch ratings and Standard & Poor's warned that India would lose its investment grading. Fitch downgraded India's sovereign-credit outlook to negative from stable last week, citing the heightening risk of economic growth deteriorating further if measures are not taken to improve operational environment for business and investment.
The Reserve Bank of India reportedly instructed oil marketing companies to route 50 percent of their U.S. dollar purchases through a single public sector bank in order to reduce market volatility and arrest the rupee's fall. Oil companies, the biggest buyers of dollar in the domestic foreign exchange market, currently buy dollar through competitive bidding.
by RTT Staff Writer
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