The rupee crashed to a fresh lifetime low of 70.09 against the dollar as investors were nervous that the plunge in the lira could prompt capital outflows from other emerging economies that run a hefty current account deficit and rely on foreign capital.
Turkey’s lira remained under pressure in Asian trade today but markets in the region enjoyed a little more stability after the previous day’s turmoil.
Nervous investors were keeping an eye on developments in Ankara after yesterday’s bloodletting that saw the lira hit record lows against the dollar and euro, and equity markets go into freefall on concerns Turkey’s financial crisis could spread globally.
In early Asian trade, the Turkish unit was at 6.91 to the dollar and 7.89 to the euro, well off the 7.24 to the dollar and 8.12 to the euro seen yesterday but still uncomfortably high. The unit is down about a fifth against the greenback since Friday.
The crisis has been sparked by a series of issues including a faltering economy -- the central bank has defied market calls for rate hikes -- and tensions with the United States, which has hit Turkey with sanctions over its detention of an American pastor.
The euro hovered near one-year lows against the dollar and the Swiss franc as the Turkish lira wobbled, on worries economic troubles in Turkey could hit European banks and spread to other emerging economies.
Early trade
The rupee recovered from all-time low of 69.91, gaining 11 paise to 69.80 against the US dollar in early trade, on some macroeconomic boost.
However, it crashed to 70.09 on Turkish currency turmoil. The domestic unit hovered in a range of 70.09 and 69.68 before being quoted at 69.98, down 7 paise at 10.45 am local time.
Retail inflation
In a ray of hope for the domestic economy, latest data showed that retail inflation fell to 9-month low of 4.17 per cent in July on declining vegetable prices which may prompt the Reserve Bank to pause interest rate hike in its next monetary policy review.
In the last two reviews, the RBI had raised the key repo rate by 0.25 per cent each on inflationary concerns. The next bi-monthly policy is to be unveiled on October 5.
Yesterday, the rupee had plunged by Rs 1.08, or 1.57 per cent, to a record low of 69.91 against the US currency amid fears that Turkish currency turmoil could turn out into a global financial crisis.
Meanwhile, the benchmark BSE Sensex recovered 184.93 points, or 0.49 per cent, to 37,829.83 points in early trade.