Rupee becomes worst performer in Asia
Against the backdrop of the tensions caused by US-China war & India’s differences with its western neighbor, Pakistan, the Indian rupee slumped by more than 3% this month. This is its second-worst monthly loss in four years. Reports suggest that the currency has dipped in 7 out of the last 10 months. The rise in inbound investments into rupee bonds was largely driven by carry trades. This has created anxiety among investors that there may be a quick reversal in flows if the drop in rupee is not checked.
“Any large-scale unwinding of bond holdings by foreign investors risks triggering a downward spiral for the rupee to a fresh low,” notes Samir Lodha, chief executive officer, QuantArt Market Solutions.