Rupee's Swoon Dizzies Indians

For most of 2013, the Indian rupee, like the currencies of almost all emerging economies, has been steadily losing ground against the dollar. Over the last week, though, this drift has become a disturbance as the rupee has gone into free fall, repeatedly plumbing new lows and sending stock markets into a panic. The rupee fell by more than 2 percent against the dollar on both Tuesday and Wednesday this week, each time the biggest single-day declines in its value for more than two decades.

The rupee has been hard hit by a combination of adverse global and domestic triggers, including India's economic slowdown (growth is down to 5 percent annually), an unsustainable current account deficit, high inflation and the flow of capital away from emerging markets after the announcements from the U.S. Federal Reserve in June that it was tapering its quantitative easing program. At beginning of the year, the dollar traded at 55 rupees; it was just above 60 rupees at the beginning of August. It has advanced more than 10 percent this month to just over 68 rupees, and no one believes the end is in sight.