Droopee watch: 60, here we come!
Should they rename it the Droopee? India’s currency hit a new all-time low on Wednesday, dropping to 54.52 rupees against the U.S. dollar. Despite the rupee’s plunge of more than 20 percent over the past 12 months, analysts said India’s currency won’t go into freefall, as the central bank is committed to propping it up. But finance minister Pranab Mukherjee’s halfhearted pledge to institute some austerity measures on Wednesday failed to spur much enthusiasm.
The rupee whizzed past 55 against the dollar to hit another new low Wednesday, touching 55.95 by midday, reports the Hindustan Times.
Traders said increased dollar demand from banks and importers, especially oil refiners coupled with capital outflows from foreign funds following melting stocks mainly affected the rupee value against the dollar.
They said the plunging dollar had overshadowed the stocks market as the BSE benchmark Sensex dropped below the 16,000 mark, down 179 points in midsession trade today.
Can anybody stop the bleeding?
Clearly, Manmohan Singh's mea culpa, tempered with a lame attempt to defend his government against charges of "policy paralysis," on Tuesday has not done the trick.
Look for my report later… (yes, yes, GlobalPost still uses editors!)… But the gist is that things are going to look pretty shaky until the government hikes price controls on petrol and diesel — thus reducing its subsidy burden, alleviating budget deficit pressure, and sending a signal that it's ready to take action despite possible political consequences.
Rupee watchers say they're hoping for such a move as early as June, which will have the added benefit of forcing the Communist Party of India (Marxist) workers and similar characters to hit the streets to burn their effigies and so on during the hottest part of the summer.