Mumbai: Rerversing all its early gains, the India Rupee on Tuesday collapsed to a life-time low of 70.09 against the US dollar, falling 16 paise amid fears that Turkish economic crisis could lead to a global financial meltdown.
After posting its weakest ever loss of Rs. 1.09 against the US dollar on Monday, the Indian Rupee strengthened by 23 paise in early trade on Tuesday. However, at about 10:30 am, it hit all-time low of 70.1 per dollar, extending it to 70.09, news agency PTI reported.
The ongoing currency turmoil in Turkey has dampened investors' sentiments globally. Investors are turning to dollar as safe haven with Turkeys currency lira crisis continuing since the last week.
"Panic demand of dollars from importers and strength in the dollar index pulled the rupee today. Also, intervention from Reserve Bank of India (RBI) is very limited in the forex market," said Rushabh Maru, Research Analyst, Anand Rathi Share and Stock Brokers.
The falling rupee, which has so far lost over 8 per cent this year, has pushed up prices of imported items such as petroleum products, commodities, electronics and engineering equipment.
The Turkish lira has weakened 45 per cent against the dollar this year.
Meanwhile, Turkey's central bank on Monday announced that it was taking all necessary measures to ensure financial stability after the collapse of the lira, promising to provide "all the liquidity the banks need".
The Turkish currency reached a new record low of 7.24 against the US dollar in Asia Pacific trade when markets opened on Monday morning. The lira repaired some of its losses after the central bank's announcement, but it was still down more than seven percent on the day.
Worries about President Recep Tayyip Erdogan's influence over the economy, including his repeated calls for low interest rates in the face of high inflation, and Turkey's worsening ties with the United States have contributed to the steep decline.
Erdogan has stood by his opposition to high interest rates, calling them an instrument of exploitation and dubbing himself the "enemy of interest rates".
Instead, he is looking to Turkey's banks to provide cheap credit to drive growth, but investors fear the economy is overheating. However, his comments on interest rates, along with his recent appointment of his son in law, Albayrak, as finance minister have intensified concerns the central bank is not independent.
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