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MUMBAI – The Indian rupee has reached its lowest level against the dollar, because of fears that rising oil prices will undermine the country's strong economic fundamentals.
The Indian currency crossed for the first time Thursday 69 dollars to the dollar; the previous record, 68.90, was set in 2016.
"There is a bit of panic in the market as we venture into a new territory," said Kishore Narne, Head of Commodities and Currencies at Motilal Oswal Financial Services Ltd.
The 8% fall of the rupee in 2018 makes it the least successful Asian currency this year.
The dollar climbed against most currencies as investors flee to safe haven assets, but the rupee was particularly affected by international investors who dropped their debt. For the year, they were net sellers of $ 6 billion in Indian debt, including $ 1.6 billion this month. Last year, they were net buyers of $ 23 billion.
The rupee has collapsed despite the central bank's efforts to support and attract investment. Earlier this year, the Reserve Bank of India increased investment limits on corporate bonds and relaxed the rules applicable to foreign owners of state bonds.
Analysts said pressure on the rupee will continue for the next few months, fearing that rising oil prices will push India's current account and budget deficits higher.
India is particularly vulnerable to fluctuations in oil prices because it imports 80% of its energy needs. Oil prices reached their highest level in more than three years this week.
Write to Debiprasad Nayak at [email protected]
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