News - Emerging markets
Categories: Emerging Markets
The Indian rupee has plummeted to a record low as the soaring oil price and internal economic problems continue to derail growth.
The Indian currency plunged 3.7% in a single day, its largest one-day percentage fall in 18 years, to as low as 68.7 rupees per dollar.
The currency is headed for its worst annual loss since a balance of payments crisis in 1991, having fallen 20% already this year, and 13.6% this quarter.
The local stock market also tumbled as investors sold nearly $1bn Indian shares in Tuesday's trading sessions, according to Reuters.
Investors panicked as tensions in Syria continue to escalate and governments in the US, France and UK consider military action.
The worry is that continued unrest in the Middle East will put further upward pressure on oil prices, which have already seen a significant climb this month.
The price for Brent crude has jumped 8.7% this month alone and this spells a detrimental cost increase for India, which imports 80% of its oil.
As the rupee continued to hit new lows, the local Sensex index shed a further 1.51% to 17,696. So far year to date the index is down 7.7%.
Apart from broader global issues, India is also battling with a budget and current-account deficit, which last year reached $87.8bn.
According to reports, the local government is striving to contain the deficit within the $70bn mark in the year to March 2014, and this is putting further pressure on the currency and the local market.
Meanwhile, local bonds also continue to suffer. Since the end of May investors have pulled a total of $8.7bn from local debt on Fed tapering fears.