Indian rupee breaches 64-level vs US dollar before RBI steps in
Late on Monday, the Reserve Bank of India increased the foreign direct investment cap in asset reconstruction companies to 74 percent from 49 percent.
Earlier on Monday, India banned the duty-free import of flat-screen TVs from August 26.
The 1-month onshore forward rate for the rupee was at 64.47 while the offshore non-deliverable forward was at 64.71, an unusually wide gap that reflected bearish overseas bets against the partially convertible currency.
Emerging market currencies have been under growing pressure from outflows amid expectations the U.S. Federal Reserve will soon start to wind down its super-easy money policy, possibly as early as next month.
Indonesia's rupiah, Brazil's real and South Africa's rand have also been in retreat as investors eye those countries that are most vulnerable to an exodus of foreign capital.
WEAK GOVERNMENT, WEAK GROWTH
Prime Minister Manmohan Singh's weak coalition government, heading into national elections by next May, has been hamstrung from pushing through reforms to attract more long-term capital.
The rupee's plunge adds to worries about India's ability to fund a record high current account gap and whether Finance Minister P. Chidambaram will be able to meet his goal to pare the fiscal deficit to 4.8 percent of gross domestic product (GDP) this fiscal year.
Rating agency Moody's said that while the rupee depreciation was a new variable for the economy, the factors underpinning it have been incorporated in its investment grade rating for India.
India is at the lowest investment-grade sovereign rating.
"We believe that meeting the fiscal deficit target will be very challenging this year,