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India Most Vulnerable To Capital Outflows: Moody's

Tuesday, September 24, 2013
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Bangalore: India is among the countries that are most vulnerable to capital outflows as it relies heavily on external funding, global credit rating agency Moody's cautioned.

"India and Indonesia are the most vulnerable to capital outflows because of high reliance on external funding," Moody's Analytics said in its report - 'How U.S. Monetary Tightening Affects Asian Markets'.

It said the impact of recent Fed announcements on bond yields have exposed structural flaws in Asian economies, particularly in India and Indonesia.

Moody's said the U.S. Fed's talk earlier of a likely tapering of monetary stimulus depreciated the rupee by 15 percent, making it the worst performing currency in Asia.

The U.S. Federal Reserve last week surprised the markets by saying it will continue with its monthly $85 billion bond buying programme and wait for more evidence of growth recovery before thinking of unwinding the stimulus.

Expectations that the stimulus programme would be tapered had led to fears of capital outflows, causing the rupee to depreciate against the dollar and stocks to fall.

The rupee touched a low of 68.86 to the U.S. dollar on August 28. It is currently trading around 62.83 to a dollar.

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Source: PTI
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