Indian rupee hits new low

The Indian rupee continued to fall Tuesday, plunging to a record low of 66.24 against the U.S. dollar on a combination of fears over a military strike in Syria and concern that a food aid bill passed in the lower house of the Indian parliament Monday will distract the government from investing in the economy and reducing its deficit.

The currency fell 2.9 per cent, the biggest single-day loss since 1995, Reuters news agency reported.

The drop was only the latest for the battered currency. The rupee has lost a sixth of its value against the dollar since the start of the year, and India's stock market has dropped 10 per cent in the past three months, The Associated Press reported.

Investors flee India

On Monday, the rupee was at 64.20 against the U.S. dollar. According to the Bloomberg news agency, the currency has lost 3.1 per cent in the last two days and 9.1 per cent this quarter.

The currency plunge is mainly the result of investors pulling out of India and other emerging markets in Asia as anxiety grows over the expected end of the $85-billion in stimulus money that the Federal Reserve has been pumping into the U.S. economy.

But it was also precipitated by the approval of a bill to subsidize grain for the poor. Under the plan, which is also expected to be approved by the upper house, the Indian government would provide five kilograms of subsidized grain to about 67 per cent of the country's population of 1.2 billion every month.

The measure is expected to increase what the government spends on food subsidies by $4 billion but is considered necessary and long overdue by many analysts given the extent of malnutrition in the country.

Other Asian currencies also falling

India is so far the worst hit of the emerging market economies in Asia, but other countries have also suffered from investor flight and plunging currencies in recent months.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-traded currencies in Asia, excluding the Japanese yen, fell three per cent this year, hitting a 14-month low on Aug. 22.

The Associated Press reported that the Indonesian rupiah has lost nearly nine per cent so far this year and is at its lowest level in four years. The Jakarta Composite Index is down by more than 20 per cent in the past three months as economic growth slows after hitting 6.5 per cent in 2011, the news agency said.

Growth slows in Malaysia, Thailand

Malaysia's economy has also suffered, with the government downgrading its 2013 economic growth forecast to 4.5-5 per cent from six per cent. In Thailand, the economy contracted unexpectedly in the second quarter, The Associated Press reported.

Governments in those countries have begun to draw on their foreign currency reserves and introduced measures to try and stem the bleeding. India earlier this month brought in duties on imported televisions and has also raised gold taxes and hiked deposit rates to try to combat the outflow of money, The Associated Press reported.

Bloomberg reported that six of the 10 central banks in Asia with the largest reserves have reduced their foreign currency holdings, with Indonesia making the biggest reductions at 18 per cent.