Unquenchable fire spreading: Eurozone crisis already burning markets across Asia

Sunday, November 20, 2011
By Paul Martin

November 20, 2011

NEW DELHI – India’s rupee, Asia’s worst performing currency this year, could be bound for “uncharted waters,” analysts say, as fears about Eurozone debt and a slowing economy pump demand for the U.S. dollar. The rupee slipped to 51.20 per U.S. dollar Friday — a 32-month low — with no sign that it has bottomed out. “There’s nothing preventing the rupee heading into uncharted waters. We don’t really know where it will stabilize against the dollar,” Abheek Barua, chief economist of India’s HDFC bank, told AFP. The rupee has fallen 15 percent since July on worries over the debt crisis and concern about deceleration in Asia’s third-largest economy, sparked by 13 rate hikes that have failed to curb near double-digit inflation. Former chief Indian government economic advisor Shankar Acharya has warned the economy could grow by under seven percent in the financial year ending March 2012 — down from 8.5 percent last year. “The currency is suffering from global risk aversion which is likely to increase rather than decrease as well as from weakening domestic macroeconomic fundamentals,” Dariusz Kowalczyk, economist at Credit Agricole, told AFP. Money has been flowing out of India into U.S. assets such as treasury bills — seen as safe bets in times of crisis. The falling rupee is bad news for India, aggravating inflation and pushing up the price of imports. India is a net importer of foreign goods, with one-third of the total made up of crude oil imports used to power the energy-hungry nation. Other imports include steel, coal and rubber, driving up costs for manufacturers that will be passed on to consumers. –China Post

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