India’s rupee hit fresh record lows yesterday amid warnings that benefits to exporters from a weaker currency would be offset by the higher price paid by Asia’s third-largest economy for oil.
The rupee slid to 70.38 to the dollar just two days after crossing 70 for the first time as India got dragged into the turbulence of the Turkish financial crisis.
The weaker rupee will help India sell goods and its huge services sector in overseas markets, but the country is a massive importer of oil, securing more than two-thirds of its needs from abroad.
Association of Mutual Funds in India said, any boost to exports will be offset by pressures on inflation and the current account deficit, “It is a double-edged sword for the Indian economy,” said chief executive N.S. Venkatesh.
Analysts say high crude prices are squeezing the Indian currency, making it less appealing to investors.
Brent Crude was at $70.90 per barrel yesterday, well above prices of around $50 at the same time last year.
The fall in the rupee is leading to a widening of India’s current account deficit when the value of imports exceeds the value of exports, analysts say.