The Indian rupee dipped to an all-time low against the US dollar after the Federal Reserve signalled that it could start pulling back on its monetary stimulus later this year.
The rupee fell as low as 59.93, down from its Wednesday close of 58.72.
The Fed’s program to pump cash into the economy has caused capital to flow into emerging markets.
Analysts said the slide signalled India’s dependence on those foreign capital inflows.
“It is a classic case of a country’s vulnerability to capital flight because of its current account deficit situation,” said Stuart Oakley, head of Asian currency trading at Nomura.
India’s current account deficit, which is the difference between inflow and outflow of foreign currency, hit a record high of 6.7% of its gross domestic product (GDP) in the October to December quarter.
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