India's currency nears all-time lows even as government scrambles to prop it up


India’s currency neared all-time lows Monday even after the government rolled out various measures aimed at propping up the worst-performing Asian currency of 2018.

The Indian rupee fell as much as 1% to 72.6 per US dollar, even after Finance Minister Arun Jaitley announced a plan to lower the country’s current account deficit, saying the falling rupee must be dealt with “immediately.” The currency has shed more than 13% in value this year, dragged down in part by a broader emerging-market sell-off.

The new measures include reducing “non-necessary” imports, as well as relaxing rules for overseas borrowing and for banks to raise rupee-denominated overseas bonds. The government has not specified which imports would be subject to new restrictions, but local media reports suggest officials are considering regulation of luxury items like gold and cars.

Shilan Shah, senior India economist at Capital Economics, said the depreciation should help at the margin to boost exports over the near term.

“We think that these factors alone would be enough to take the edge off concerns about the external position,” Shah said. “But the government has gone a step further by announcing late on Friday that restrictions on ‘non-essential’ imports would be imposed in order to reduce the current account deficit and provide some support to the rupee.”

Ministry of Commerce data out Friday showed India’s monthly deficit retreated from a five-year high of $US18 billion in July to $US17.39 billion in August.

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