{{India’s currency cartwheeled to historic lows on Monday while markets in Indonesia took a spill, evidence of how rising U.S. yields are making it harder for emerging nations to fund their current account deficits.}}
The turbulence heightened investor caution ahead of Wednesday’s minutes of the Federal Reserve’s last policy meeting, with many fearing they might only add to the confusion about when it might scale back stimulus.
That helped gold reach its highest in two months, while keeping share markets constrained across Asia.
In Europe, Britain’s FTSE futures inched up 0.2 percent in early deals. The German DAX futures were down 0.04 percent, as bund yields climbed to the highest since early 2012.
The Indian rupee slid as far as 62.50 per dollar, emphatically breaching the previous low of 62.03. The share market .NSEI lost 1.4 percent, on top of a 4 percent drubbing last Friday.
The currency has been hurt by investor frustration at the slow pace of economic reform in India, which has made it harder for the country to finance its hefty current account shortfall.
The Reserve Bank of India has tried to restrict how much Indian residents and companies can send offshore, but that only raised fears of outright capital controls that would further undermine the confidence of foreign investors.
“The foreign investor community want tangible and ambitious reforms that look and feel like a worthy ‘second generation’ to the fundamental measures adopted in the early 1990s,” Westpac analysts said in a note.
They also found it “curious” the central bank would be fighting against a depreciation in the rupee given that it would help boost exports and limit imports over time.
wirestory
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